WEBVTT - Michael Lewis on Freakonomics Radio 0:00:15.316 --> 0:00:15.796 Pushkin. 0:00:20.516 --> 0:00:23.356 Hey, there against the Rules listeners. I am Stephen Dubner 0:00:23.396 --> 0:00:26.636 and I host Freakonomics Radio, the podcast that explores the 0:00:26.716 --> 0:00:30.036 hidden side of everything. A few months ago, I sat 0:00:30.076 --> 0:00:33.116 down with Michael Lewis to talk about his latest book, 0:00:33.236 --> 0:00:36.316 Going Infinite, The Rise and Fall of a New Tycoon. 0:00:36.796 --> 0:00:40.436 We talked about the story that's in the book, Sam Bankman, Freed, 0:00:40.556 --> 0:00:44.556 and FTX, as well as people's reactions to the book. 0:00:44.796 --> 0:00:47.596 Our episode is called why Are People So Mad At 0:00:47.836 --> 0:00:51.156 Michael Lewis, So we wanted to share this episode with you. 0:00:51.596 --> 0:01:03.316 Thanks for listening. I feel like, as much as Sam 0:01:03.356 --> 0:01:06.436 Bankman Freed has been in the center of a vortex, 0:01:07.516 --> 0:01:09.796 that you're close to the senders. Oh can you just 0:01:09.836 --> 0:01:12.196 tell me what your life has been like the past 0:01:12.196 --> 0:01:13.076 couple months? 0:01:13.916 --> 0:01:18.236 Surprisingly controversial, This material just landed in my lap, and 0:01:18.236 --> 0:01:19.836 I really did think when I was writing it, I 0:01:19.916 --> 0:01:21.716 never had more fun writing a book than I had 0:01:21.756 --> 0:01:23.956 writing this one. I knew that some people were going 0:01:24.036 --> 0:01:25.676 to be a little bit upset with the book, but 0:01:25.756 --> 0:01:28.116 I thought basically it was going to be taken as 0:01:28.116 --> 0:01:29.916 a thrill ride and it would just be a fun 0:01:29.996 --> 0:01:34.116 read for everybody. What I wasn't prepared for was just 0:01:34.236 --> 0:01:36.036 the sheer volume of the anger. 0:01:39.316 --> 0:01:42.596 Michael Lewis is one of the most popular nonfiction authors 0:01:42.716 --> 0:01:46.596 on the planet. His books include Liar's Poker, Moneyball, The 0:01:46.596 --> 0:01:50.876 Big Short, Flash Boys, and Now Going Infinite. The Rise 0:01:50.956 --> 0:01:54.356 and Fall of a New Tycoon. The tycoon in question 0:01:54.516 --> 0:01:59.956 is Sam Bankman Freed, who was briefly everyone's favorite cryptocurrency billionaire, 0:02:00.636 --> 0:02:03.596 and Michael Lewis rode shotgun for some of the rise 0:02:04.196 --> 0:02:09.316 and most of the fall. The fall was fast and hard. 0:02:09.396 --> 0:02:12.556 Was recently convicted of seven counts of fraud and conspiracy 0:02:12.596 --> 0:02:15.996 in a New York courtroom. The controversy comes from people 0:02:15.996 --> 0:02:19.436 who argue that Michael Lewis went soft on Bankman Freed 0:02:19.476 --> 0:02:22.916 instead of lasting him as a crook and a cheat. 0:02:23.556 --> 0:02:26.036 Here is how a New York Times review put it. 0:02:26.676 --> 0:02:29.676 Lewis had, in the months leading up to the disaster, 0:02:29.996 --> 0:02:33.436 a front row seat from which he could apparently see nothing. 0:02:36.396 --> 0:02:40.036 It troubles me that people want to put Sam Bankman 0:02:40.076 --> 0:02:41.876 Freed into a simple box and put him on a 0:02:41.916 --> 0:02:43.676 shelf and not think too much more about this. 0:02:44.236 --> 0:02:45.196 Why it troubles you? 0:02:45.236 --> 0:02:48.516 Why Because he's so much more and this is so 0:02:48.636 --> 0:02:50.116 much more interesting than that. 0:02:50.716 --> 0:02:54.996 Today on Freakonomics Radio. Interesting is just the start of it. 0:02:55.436 --> 0:02:59.396 Sam Bankman Freed bared all to Michael Lewis, and now 0:02:59.596 --> 0:03:02.356 Michael Lewis bears all for us. 0:03:02.956 --> 0:03:05.676 It was an unguarded ness. They was shocking. 0:03:06.236 --> 0:03:09.116 It's the latest installment of the Freakonomics Radio book Club 0:03:09.396 --> 0:03:19.436 and begins right now. 0:03:23.916 --> 0:03:27.996 This is Freakonomics Radio, the podcast that explores the hidden 0:03:28.076 --> 0:03:31.636 side of everything, with your host Stephen Dubner. 0:03:38.396 --> 0:03:41.516 Here's how Michael Lewis begins his new book, Going Infinite. 0:03:41.716 --> 0:03:44.996 This is from the audio version, with Lewis himself reading. 0:03:47.556 --> 0:03:49.636 I first heard about Sam Bankman Freed at the end 0:03:49.716 --> 0:03:52.916 of twenty twenty one from a friend who oddly enough 0:03:52.956 --> 0:03:54.956 wanted me to help him figure out who he was. 0:03:55.676 --> 0:03:57.556 My friend was about to close a deal with Sam 0:03:57.596 --> 0:04:00.116 that would bind their fates through an exchange of shares 0:04:00.156 --> 0:04:03.076 in each other's companies worth hundreds of millions of dollars. 0:04:03.956 --> 0:04:05.756 My friend asked me if I could meet with Sam 0:04:05.796 --> 0:04:08.876 and report back whatever I made of him. A few 0:04:08.876 --> 0:04:12.516 weeks Sam was on my front porch in Berkeley, California. 0:04:12.996 --> 0:04:16.196 He'd emerged from an uber in cargo shorts, a T 0:04:16.356 --> 0:04:19.916 shirt limp white socks and ratty new Balance sneakers, which 0:04:19.996 --> 0:04:22.436 I soon learned were basically the only clothes he owned. 0:04:23.356 --> 0:04:25.356 We went for a walk, the only time in the 0:04:25.396 --> 0:04:27.516 next two years I would ever see this person who 0:04:27.556 --> 0:04:30.876 was always dressed for a hike actually go for one. 0:04:31.156 --> 0:04:33.956 During our walk, I prodded him with questions, but after 0:04:33.996 --> 0:04:36.756 a while I was mostly just listening. The stuff he 0:04:36.836 --> 0:04:38.916 was telling me, all of which I should say here 0:04:39.036 --> 0:04:43.156 turned out to be true, was incredible. By the end 0:04:43.156 --> 0:04:45.676 of this walk, I was totally sold. I called my 0:04:45.716 --> 0:04:48.436 friend and said something like, go for it, swap shares 0:04:48.476 --> 0:04:51.396 with Sam Bankman Freed, do whatever he wants to do. 0:04:51.876 --> 0:04:53.516 What could possibly go wrong? 0:04:55.356 --> 0:04:57.956 As we now know, a lot of things went wrong. 0:04:58.476 --> 0:05:02.756 Bankman Freed started and ran two firms, a cryptocurrency trading 0:05:02.796 --> 0:05:07.276 firm called Alameter Research and a crypto exchange based in 0:05:07.316 --> 0:05:11.876 the Bahamas called FTX. When FTX collapsed in twenty twenty two, 0:05:12.076 --> 0:05:15.596 Bankman Freed was charged with shuffling money between the two 0:05:15.756 --> 0:05:20.196 firms and spending billions of dollars of customers deposits on 0:05:20.436 --> 0:05:26.636 political contributions, celebrity marketing, and venture capital investments. He also 0:05:26.716 --> 0:05:29.996 directed a lot of money toward the effective altruism movement. 0:05:30.716 --> 0:05:33.676 The thing is, as you read Michael Lewis's book, it's 0:05:33.716 --> 0:05:37.716 hard to separate Bankman Freed's illegal behaviors from the ones 0:05:37.716 --> 0:05:42.116 that were just sloppy or weird. The book's publication was 0:05:42.156 --> 0:05:45.356 timed to coincide with the first day of the Bankman 0:05:45.396 --> 0:05:48.276 Freed trial, so heading into the trial, a lot of 0:05:48.356 --> 0:05:50.596 people were asking Lewis what he thought. 0:05:50.996 --> 0:05:53.556 I didn't actually say I don't think he did anything illegal, 0:05:53.676 --> 0:05:56.836 or I'm not sure what I said was I don't 0:05:56.876 --> 0:05:59.276 want to say, because I wanted to just tell the 0:05:59.316 --> 0:06:01.756 story and let the reader decide what they think. The 0:06:01.836 --> 0:06:04.956 book is filled with stuff that is essentially lawbreaking, but 0:06:04.996 --> 0:06:06.996 I'm just telling it rather than telling you he broke 0:06:07.036 --> 0:06:07.396 the law. 0:06:07.636 --> 0:06:10.516 So do you think maybe that's why you've been somewhat 0:06:10.516 --> 0:06:12.796 punished because you didn't act as judge and jury in 0:06:12.836 --> 0:06:13.236 the book. 0:06:13.716 --> 0:06:17.476 Yes, totally. But what I did, and I did very intentionally, 0:06:17.676 --> 0:06:20.836 was I let the characters in the book investigate him 0:06:21.036 --> 0:06:23.556 rather than me. I mean it was made to order 0:06:23.596 --> 0:06:27.636 for narrative nonfiction. I had the chief operating officer of 0:06:27.676 --> 0:06:30.996 the company, who'd been from the beginning, who realizes when 0:06:30.996 --> 0:06:33.996 it all blows up. She doesn't know how this company operated, 0:06:34.196 --> 0:06:37.156 and she wants to lynch him like she's helping the prosecutor. 0:06:37.196 --> 0:06:39.956 She's trying to find evidence. So I just let her 0:06:39.996 --> 0:06:40.276 do it. 0:06:40.636 --> 0:06:45.876 So your books are generally very well reviewed among writers. 0:06:46.436 --> 0:06:49.676 You're thought of as a writer's writer, so I'm not 0:06:49.836 --> 0:06:54.076 used to seeing you get this kind of attention. Bad reviews, 0:06:54.356 --> 0:06:57.076 features that call you into question. I'll read you a 0:06:57.116 --> 0:07:01.356 couple of headlines from the Washington Post. Michael Lewis goes 0:07:01.436 --> 0:07:06.676 close on Sam Bankman Freed, maybe too close. La Times. 0:07:06.716 --> 0:07:08.756 What you won't learn from Michael Lewis's book on the 0:07:08.876 --> 0:07:13.156 ft could fill another book another La Times piece in 0:07:13.596 --> 0:07:16.676 Michael Lewis, Sam Bankman Fried found his last and most 0:07:16.756 --> 0:07:22.116 willing victim. So the through line here is that critics 0:07:22.156 --> 0:07:25.636 feel you still treat him too much like a hero 0:07:26.356 --> 0:07:30.076 and at least like someone to be sympathized with. 0:07:30.676 --> 0:07:33.316 Well, can I push back on this first? They are 0:07:33.396 --> 0:07:37.356 also reviews by better writers in The New Yorker, in 0:07:37.436 --> 0:07:39.996 the London Review of Books, in The Times Literary Supplement 0:07:40.156 --> 0:07:43.236 that are very positive. There was no consensus in the reviews, 0:07:43.756 --> 0:07:48.196 but the objections here were bewildering to me because the 0:07:48.236 --> 0:07:50.796 idea that you're not supposed to get to know your subject. 0:07:51.276 --> 0:07:53.796 I mean, there are people who have been presenting themselves 0:07:53.836 --> 0:07:56.196 as authorities on Sam Bankman Freed, who's never met him. 0:07:56.676 --> 0:07:58.916 It's really useful to get to know someone if you're 0:07:58.916 --> 0:08:01.476 going to write about them. The idea that I was 0:08:01.556 --> 0:08:05.316 somehow blinded to what he had done is preposterous. Because 0:08:05.316 --> 0:08:08.396 I didn't start writing this thing until January. 0:08:07.996 --> 0:08:08.756 Of the year. 0:08:09.116 --> 0:08:12.396 You could see what it does. I think that people 0:08:12.436 --> 0:08:17.316 are confusing painting him as he actually is was sympathizing 0:08:17.356 --> 0:08:20.676 with him. Is it surprising that if you paint him 0:08:20.676 --> 0:08:25.036 as he actually is you feel yourself disturbingly drawn to him? 0:08:25.596 --> 0:08:28.396 Because this was the problem in the first place. This 0:08:28.476 --> 0:08:30.436 is what led to the whole problem. If you don't 0:08:30.436 --> 0:08:32.516 feel some attraction him, at least in the beginning of 0:08:32.556 --> 0:08:35.476 the book, you're completely missing why this happened in the 0:08:35.476 --> 0:08:38.076 first place. So to start out as, oh, this guy's 0:08:38.116 --> 0:08:39.996 evil and everybody saw it and I saw it first, 0:08:39.996 --> 0:08:44.076 it's false. Second, you miss the wonder of the story. 0:08:46.036 --> 0:08:49.316 The story really begins in twenty seventeen, when Bankman Freed 0:08:49.396 --> 0:08:52.476 quit his job at the trading firm Jane Street Capital 0:08:52.876 --> 0:08:56.716 to start his own crypto trading firm, Alameda Research. As 0:08:56.836 --> 0:09:01.756 Lewis's book makes clear, Alameda was from the beginning a mess. 0:09:02.356 --> 0:09:05.756 Bankman Freed was very good at finding clever ways to 0:09:05.836 --> 0:09:09.036 make money by trading cryptocurrencies at a time when most 0:09:09.196 --> 0:09:13.516 mainstream trading firm still avoided crypto. But as a CEO 0:09:13.956 --> 0:09:19.596 he was terrible, unfocused, unreliable, and totally uninterested in any 0:09:19.676 --> 0:09:23.076 of the normal processes required to run a company or 0:09:23.116 --> 0:09:24.596 to manage employees. 0:09:25.196 --> 0:09:27.876 And after about three months, half of them hated Sam 0:09:27.916 --> 0:09:29.596 and half of them thought he was a criminal. 0:09:30.116 --> 0:09:33.996 Then he created the cryptocurrency trading platform FTX and became 0:09:34.196 --> 0:09:38.956 CEO of it. He timed the crypto wave perfectly. By 0:09:39.036 --> 0:09:43.076 twenty twenty one, Forbes put Sam Bankminfried's wealth at twenty 0:09:43.116 --> 0:09:45.876 two and a half billion dollars, making him the world's 0:09:45.956 --> 0:09:49.556 richest person under thirty At FTX, he was still a 0:09:49.636 --> 0:09:52.276 bad CEO, but there was more to it than that. 0:09:53.116 --> 0:09:56.516 What he did is he misappropriated funds. He told people 0:09:56.556 --> 0:09:58.636 that their money was safe in one place, and he 0:09:58.716 --> 0:10:01.716 was actually he was taking big gambles with it in 0:10:01.756 --> 0:10:04.436 another place. What's odd about these gambles is that some 0:10:04.516 --> 0:10:07.716 of them seemed to have worked out pretty well. Look, 0:10:07.956 --> 0:10:09.516 I'm not a lawyer, and I was never all that 0:10:09.556 --> 0:10:11.716 interested in the legal questions. I was more interested in 0:10:11.756 --> 0:10:16.396 the moral questions. And he clearly, in my story, right 0:10:16.436 --> 0:10:19.876 from the beginning, did something that was illegal. He didn't 0:10:19.916 --> 0:10:22.956 ever separate the funds like he had his hedge fund, 0:10:23.036 --> 0:10:25.956 alometor research or quant fund or whatever you want to 0:10:25.996 --> 0:10:29.476 call it, and his exchange. And the way people got 0:10:29.516 --> 0:10:31.596 their dollars onto the exchange was by sending it to 0:10:31.596 --> 0:10:33.516 his quand fund, and it never left the Quand fund. 0:10:33.876 --> 0:10:37.276 So he was essentially extending himself a free loan, using 0:10:37.276 --> 0:10:38.156 customer to posits. 0:10:38.236 --> 0:10:41.276 Right from the beginning, when you started hanging out with Sam, 0:10:41.356 --> 0:10:43.796 he was already well known in some circles, maybe not 0:10:43.956 --> 0:10:48.796 famous quite. And then your relationship extended, including to the 0:10:48.956 --> 0:10:51.796 collapse of FTX, up to the trial and so on. 0:10:52.236 --> 0:10:54.316 First of all, I want to hear about how the 0:10:54.356 --> 0:10:57.356 reporting happened. I mean, we know a lot about you 0:10:57.436 --> 0:11:00.356 as a reporter. You really believe in the old school 0:11:00.396 --> 0:11:03.036 idea of just hanging out with a notebook. So I 0:11:03.076 --> 0:11:05.476 want to hear about the relationship how it worked, and 0:11:05.596 --> 0:11:09.756 especially how the relationship changed between you and him after 0:11:09.956 --> 0:11:10.636 the collapse. 0:11:11.196 --> 0:11:14.396 I didn't start out thinking I had a book or 0:11:14.476 --> 0:11:18.076 what the book was. I start out thinking, this character 0:11:18.276 --> 0:11:22.116 is really interesting and the situation's bizarre. He's gone from 0:11:22.236 --> 0:11:24.676 zero to having twenty two billion dollars in eighteen months, 0:11:24.716 --> 0:11:27.316 and the world is organizing itself around this pile of money. 0:11:27.556 --> 0:11:29.956 I just want to watch. So that's how it starts. 0:11:29.956 --> 0:11:31.836 I say to him, I just want to watch. I 0:11:31.836 --> 0:11:35.156 don't know what there is here, and he says, fine, 0:11:35.436 --> 0:11:37.476 come on down to Bahamas and here are the keys. 0:11:38.076 --> 0:11:41.116 And so I spend a year doing that. At no 0:11:41.276 --> 0:11:44.756 point did Sam becinfree ask me what I was doing. 0:11:45.276 --> 0:11:47.956 At no point did he say I can't answer that question, 0:11:48.156 --> 0:11:51.676 or why are you asking that question. It was an unguardedness. 0:11:52.316 --> 0:11:55.516 They were shocking, and it wasn't just with me. I 0:11:55.556 --> 0:11:58.396 think other reporters found that when they pushed a little bit, 0:11:58.476 --> 0:11:59.916 doors just opened. There. 0:12:00.236 --> 0:12:04.556 Some of the scenes in the book aren't just comically bizarre, 0:12:04.796 --> 0:12:07.356 like when he's on a zoom call with Anna wind 0:12:07.356 --> 0:12:11.596 Tour from Vogue magazine, who wants him to participate in 0:12:11.756 --> 0:12:16.356 maybe fund the mech Gala the very high profile fashion 0:12:16.396 --> 0:12:19.716 event at the Metropolitan Museum of Art in New York, YEP. 0:12:20.076 --> 0:12:22.156 In that instance, where are you Are you in the 0:12:22.236 --> 0:12:23.516 room with him when he's on that call? 0:12:23.756 --> 0:12:24.036 Yes? 0:12:24.596 --> 0:12:25.236 Where is that? 0:12:25.396 --> 0:12:28.276 It's in the Beverly Hills Hilton Hotel. 0:12:28.236 --> 0:12:29.076 And he's in La. 0:12:29.196 --> 0:12:32.116 Why he's in La because he's gone to the super Bowl. 0:12:32.516 --> 0:12:34.076 It was the day he was leaving to go back 0:12:34.076 --> 0:12:36.116 to the Bahamas, and I was going to join him. 0:12:36.356 --> 0:12:37.996 He says, I got a call. And I said who 0:12:38.076 --> 0:12:39.516 you got a call with? He says, I don't know. 0:12:39.916 --> 0:12:42.836 Anna went tour And I said, oh really, And so 0:12:42.916 --> 0:12:45.076 I sat off to one side and it was just 0:12:45.276 --> 0:12:47.156 there was no one else in the room, just him 0:12:47.476 --> 0:12:50.996 and I watched and I scribbled furiously notes as he spoke, 0:12:51.396 --> 0:12:56.316 and realized in the moment that I was watching a 0:12:56.396 --> 0:13:00.236 microcosm of Sam Bankmanfree's relationship with the outside world, especially 0:13:00.236 --> 0:13:03.156 the outside world that organized hisself around piles of money. 0:13:03.156 --> 0:13:05.756 And how would you describe that relationship. 0:13:05.516 --> 0:13:08.876 Sycophanic towards him? There was a certain obliviousness on his 0:13:08.876 --> 0:13:11.156 part to who these people were and why they wanted 0:13:11.196 --> 0:13:14.156 what they wanted. He knew they wanted money, but beyond that, 0:13:14.236 --> 0:13:16.196 he didn't pay that close attention to who they were. 0:13:16.276 --> 0:13:18.676 He's trying to figure out just how much attention he 0:13:18.716 --> 0:13:21.596 should pay to these people because they were constant. It 0:13:21.676 --> 0:13:25.076 was like brunch with Shack and dinner with the head 0:13:25.076 --> 0:13:27.356 of Gold and Sacks. A lot of this was completely 0:13:27.396 --> 0:13:27.836 new to him. 0:13:28.236 --> 0:13:31.916 So on this Anna Winter call, he agrees to what 0:13:31.956 --> 0:13:37.116 she's asking for, to maybe sponsor attend something the met gala, 0:13:37.196 --> 0:13:39.996 but then in the end he cancels on her at 0:13:40.036 --> 0:13:40.756 the last minute. 0:13:41.116 --> 0:13:45.116 Much more complicated than that, because he seems to agree 0:13:45.116 --> 0:13:50.036 to everything she says, everything because he's actually not really listening. 0:13:50.036 --> 0:13:52.316 He's playing a video game when he's talking to her. 0:13:52.636 --> 0:13:55.676 He just turns her picture off when she's talking and 0:13:55.756 --> 0:13:58.796 plays the video game. And only when he hears like, 0:13:59.036 --> 0:14:00.636 oh Sam, what do you think of that? Does he 0:14:00.716 --> 0:14:03.556 wake up, turn her picture back on, stall get the 0:14:03.636 --> 0:14:07.596 question again and answer it. She would have understandably left 0:14:07.636 --> 0:14:11.556 that conversation thinking that he was all in on the 0:14:11.636 --> 0:14:14.116 met Gala, that he was going to go, maybe even 0:14:14.196 --> 0:14:17.596 pay for it, But he hasn't actually said very much 0:14:17.636 --> 0:14:22.276 except yep. And then when he's done, I ask him, like, really, 0:14:22.436 --> 0:14:24.716 you're sitting here in your shorts and your cargo shorts 0:14:24.716 --> 0:14:26.276 and your T shirt and your limp socks. You have 0:14:26.316 --> 0:14:28.916 no interest in fashion. You don't even know who she is, Like, 0:14:29.036 --> 0:14:30.436 you're really going to go to that? And he goes, 0:14:30.476 --> 0:14:33.316 I never really thought about it. You know, by the 0:14:33.356 --> 0:14:35.716 time I met him, he had figured out that the 0:14:35.756 --> 0:14:37.876 best way to navigate the world of the rich and 0:14:37.876 --> 0:14:40.596 famous was just to agree with everything they said. He 0:14:40.636 --> 0:14:42.796 actually says this. He says, I've discovered it's like an 0:14:42.836 --> 0:14:45.516 AI program, I discover people like you if you agree 0:14:45.556 --> 0:14:47.036 with him, what would. 0:14:46.876 --> 0:14:51.636 You say that Sam Bankman Freed is or was exceptionally 0:14:51.676 --> 0:14:53.796 good at and exceptionally bad at. 0:14:54.316 --> 0:14:59.196 He was exceptionally bad at understanding how people would feel 0:14:59.236 --> 0:15:03.116 about his behavior, Like even now I think he doesn't 0:15:03.196 --> 0:15:07.156 understand why people are so angry. When he moves from childhood, 0:15:07.196 --> 0:15:09.916 which his child is completely isolated, it has no real 0:15:09.956 --> 0:15:13.156 relationships with anybody, into adulthood and he starts to figure 0:15:13.156 --> 0:15:15.356 out he wants to have relationships with people. He learns 0:15:15.356 --> 0:15:19.276 how to kind of fake emotional his emotions and kind 0:15:19.316 --> 0:15:21.796 of signaling his inner life so that people aren't so 0:15:21.836 --> 0:15:24.116 freaked out by him. There's a sort of absence in 0:15:24.156 --> 0:15:27.316 his imagination of what other people are feeling. What was 0:15:27.316 --> 0:15:32.036 he exceptionally good at. He was interesting in his attempts 0:15:32.076 --> 0:15:36.196 to quantify the unquantifiable. To me, what made him when 0:15:36.196 --> 0:15:38.956 I first met him, such an interesting character was the 0:15:38.956 --> 0:15:41.316 way he was moving through the world was so weird. 0:15:41.636 --> 0:15:46.876 He was essentially moneyballing life. Everything was an expected value calculation, 0:15:47.156 --> 0:15:48.676 and in some ways you can think of him as 0:15:48.676 --> 0:15:53.996 having replaced principles with probabilities. There were no fixed rules. 0:15:54.076 --> 0:15:57.756 Everything was We're going to try to measure the expected 0:15:57.836 --> 0:16:00.716 value of this decision or that decision and do the 0:16:00.756 --> 0:16:04.596 thing that's the highest expected value, and doing things like 0:16:04.756 --> 0:16:06.996 making decisions about whether to get married and have children 0:16:07.076 --> 0:16:07.436 this way. 0:16:10.236 --> 0:16:13.276 Sam Bankman Freed grew up in California. Both his parents 0:16:13.316 --> 0:16:17.476 were legal scholars at Stanford. Sam went to college at MIT, 0:16:17.596 --> 0:16:20.596 where he studied physics and math. It was during college 0:16:20.636 --> 0:16:23.676 that he met a young philosophy professor from Oxford named 0:16:23.756 --> 0:16:27.036 Will mccaskell, who made him think about his life differently. 0:16:27.636 --> 0:16:32.596 Here is a passage from going Infinite. 0:16:32.276 --> 0:16:34.596 The argument that mcaskell put to Sam and a small 0:16:34.636 --> 0:16:37.276 group of Harvard students in the fall of twenty twelve, 0:16:37.596 --> 0:16:41.916 went roughly as follows, you student at an elite university 0:16:42.236 --> 0:16:45.036 will spend roughly eighty thousand hours of your life working. 0:16:45.716 --> 0:16:47.516 If you're the sort of person who wants to do 0:16:47.676 --> 0:16:50.356 good in the world, what is the most effective way 0:16:50.396 --> 0:16:53.996 to spend those hours? Put bluntly, should you do good 0:16:54.276 --> 0:16:56.636 or make money and pay other people to do good? 0:16:57.236 --> 0:16:59.476 Was it better to become a doctor or a banker. 0:17:00.916 --> 0:17:03.516 Mccaskell made a rough calculation of the number of lives 0:17:03.556 --> 0:17:06.356 saved by a doctor working in a poor country where 0:17:06.436 --> 0:17:09.516 lives were cheapest to save. Then he posed a question, 0:17:10.116 --> 0:17:13.876 what if I become an altruistic banker pursuing a lucrative 0:17:13.916 --> 0:17:18.556 career in order to donate my earnings. Even a mediocre 0:17:18.636 --> 0:17:21.796 investment banker could expect sufficient lifetime earnings to pay for 0:17:21.876 --> 0:17:25.796 several doctors in Africa, and thus would save several times 0:17:25.796 --> 0:17:27.796 more lives than any one doctor. 0:17:30.356 --> 0:17:34.956 Mccaskell and his associates called their movement effective altruism. My 0:17:35.196 --> 0:17:39.396 Freakonomics friend and co author Steve Levitt interviewed mccaskell on 0:17:39.476 --> 0:17:44.156 his podcast People I Mostly Admire in August of last year. 0:17:44.236 --> 0:17:47.356 This was just a couple months before Sam Bankman freed 0:17:47.596 --> 0:17:50.556 was arrested. Here is a piece of that interview with 0:17:50.796 --> 0:17:54.196 mccaskell talking about the earning to Give model. 0:17:54.596 --> 0:17:57.476 The biggest success story for learning to give is Sam 0:17:57.516 --> 0:18:01.116 Bankman Freeds, who's now the relitious person in the world 0:18:01.196 --> 0:18:03.516 under the age of thirty five, and he's publicly stated 0:18:03.556 --> 0:18:05.796 he's giving away ninety nine percent of his wealth or more. 0:18:06.036 --> 0:18:08.356 And as all ready i'mping up is giving. I think 0:18:08.436 --> 0:18:10.476 part of what helps here is that we've just built 0:18:10.516 --> 0:18:13.556 this community. It's much easier to live up to your 0:18:13.916 --> 0:18:16.396 ideals if you've got a bunch of people around you 0:18:16.396 --> 0:18:18.796 who will please you for living up to them. And 0:18:19.036 --> 0:18:22.796 maybe you'll feel shunned or less welcome if you're claiming 0:18:22.876 --> 0:18:25.156 that you want to do enormous amounts of good and 0:18:25.476 --> 0:18:27.156 give enormous amounts but actually aren't. 0:18:27.796 --> 0:18:31.796 When Bankman Freed heard mccaskell's pitch back in twenty twelve, 0:18:32.356 --> 0:18:36.196 he was sold. He ultimately decided to make as much 0:18:36.276 --> 0:18:41.156 money as possible. His personal goal was infinity dollars, thus 0:18:41.276 --> 0:18:44.476 the title of Michael Lewis's book, and that's why after 0:18:44.516 --> 0:18:47.116 he graduated from MIT, he took a job in New 0:18:47.196 --> 0:18:50.396 York doing high frequency trading at Jane Street Capital. 0:18:50.836 --> 0:18:52.876 The people on Wall Street who hired him would have 0:18:52.916 --> 0:18:55.396 told you and that he was extremely good when you 0:18:55.476 --> 0:18:59.236 gave him games to play that required these expected value calculations. 0:18:59.396 --> 0:19:01.956 He was a wizard that he was really really good 0:19:01.956 --> 0:19:06.316 at dealing with sort of messy, semi chaotic environments and 0:19:06.356 --> 0:19:09.196 making the smart decisions in them. Here's an example. If 0:19:09.236 --> 0:19:11.716 you asked him to sit down and play chess with 0:19:11.756 --> 0:19:15.316 a grand master, he would have been okay, but not great. 0:19:15.356 --> 0:19:18.036 But if you change the game it was speed chess, 0:19:18.036 --> 0:19:19.956 and you had five seconds to make a move, and 0:19:20.116 --> 0:19:22.916 every minute you change the rules of the game so 0:19:22.996 --> 0:19:24.756 that all of a sudden the bishops have to be 0:19:24.796 --> 0:19:26.996 pawns and the pawns have to be bishops. He might 0:19:26.996 --> 0:19:29.676 have beaten the grand master in that kind of environment 0:19:29.716 --> 0:19:32.316 where it's almost impossible to know what the right answer is, 0:19:32.316 --> 0:19:34.716 but you can make some quick judgments and act on them. 0:19:35.076 --> 0:19:36.276 He was especially good. 0:19:36.716 --> 0:19:41.036 When you say he replaced principles with probabilities. It strikes 0:19:41.036 --> 0:19:44.796 me that that's a good way of describing the fear 0:19:45.516 --> 0:19:47.756 that's going on right now of what AI is going 0:19:47.836 --> 0:19:48.116 to do. 0:19:48.636 --> 0:19:51.036 That's funny you say this When I was thinking about 0:19:51.076 --> 0:19:53.796 what this story was a parable for when I was 0:19:53.796 --> 0:19:55.316 writing it, one of the things that kept popping in 0:19:55.316 --> 0:19:57.116 my head was a parable for AI. It was like 0:19:57.156 --> 0:19:59.796 a foreshadowing of what happened when you let an artificial 0:19:59.796 --> 0:20:02.356 intelligence loosen the world with a goal, telling it what 0:20:02.476 --> 0:20:04.716 to do, but not telling it how to do it right. 0:20:05.116 --> 0:20:07.556 So you tell it to get a reservation at your 0:20:07.556 --> 0:20:10.236 favorite restaurant tomorrow night, and it go out and finds 0:20:10.236 --> 0:20:12.276 that the restaurants fully booked and starts to kill the 0:20:12.276 --> 0:20:14.796 people who have reservations to get you a table. That's 0:20:14.836 --> 0:20:18.236 Sam Bagmunfreed. That's Sam Bagman Freed. He's programmed him sell 0:20:18.356 --> 0:20:20.756 himself to make as much money as possible to then 0:20:20.916 --> 0:20:24.556 spend to to defray existential risk to humanity without any 0:20:24.596 --> 0:20:27.716 instructions about what he can't do in order to do that. 0:20:28.316 --> 0:20:31.836 I felt, at any given moment when he's making his decisions, 0:20:32.076 --> 0:20:36.356 he was always on pretty shaky ground in his calculations, Like, 0:20:36.796 --> 0:20:40.196 I don't know what the probability of AI wiping us 0:20:40.196 --> 0:20:42.556 all out, or some pandemic wiping us all out, or 0:20:42.556 --> 0:20:45.516 an asteroid hitting the earth, but neither is he And 0:20:45.636 --> 0:20:48.316 yet he's putting very confidently numbers on these things and 0:20:48.396 --> 0:20:49.996 acting on these numbers. 0:20:52.116 --> 0:20:55.076 Many of the people Bankman Freed recruited to work at 0:20:55.116 --> 0:21:00.556 Alameda and FTX also considered themselves effective altruists or eas 0:21:00.876 --> 0:21:04.276 and they talked about the expected value of their actions 0:21:04.636 --> 0:21:05.556 the same way he did. 0:21:06.076 --> 0:21:09.636 It was quirky, and it was weird watching people think 0:21:09.676 --> 0:21:12.436 they could be precise about things that you just couldn't know. 0:21:12.996 --> 0:21:15.516 But I actually quite liked the fact that there were 0:21:15.516 --> 0:21:18.436 people who were worrying about these things. And to their credit, 0:21:18.556 --> 0:21:21.276 right the effective altruists get to the fear of AI 0:21:21.396 --> 0:21:24.276 before all of us. They weren't all wrong. They aren't 0:21:24.276 --> 0:21:25.916 all wrong. My god, we may look back and say 0:21:25.916 --> 0:21:26.596 they were all right. 0:21:27.036 --> 0:21:30.956 I'm curious what impressions you walked away with of the 0:21:30.996 --> 0:21:34.916 effective altruist crowd, especially Will mccaskell, the ringleader. I'm curious 0:21:35.356 --> 0:21:39.236 whether you think he and the core movement are sincere. 0:21:39.476 --> 0:21:42.436 Are they a little bit grifty? Are they both? 0:21:42.836 --> 0:21:46.116 I think they're completely sincere. But on the other hand, 0:21:46.116 --> 0:21:48.556 the best con men believe their own con but I 0:21:48.556 --> 0:21:51.476 don't think of them as con men at all. They're academics. 0:21:51.956 --> 0:21:56.236 There's a kind of blinder quality to them. The whole movement. 0:21:56.516 --> 0:21:59.196 It has this cult like quality in that it attracts 0:21:59.196 --> 0:22:01.556 a certain kind of person and then they get their 0:22:01.556 --> 0:22:04.476 meaning of life from the thing. But it's a kind 0:22:04.476 --> 0:22:08.236 of anti cult cult in that unlike most cults, well 0:22:08.396 --> 0:22:10.916 what is it's a cult? Reason right, It's a cult 0:22:10.916 --> 0:22:13.716 where if you have a better argument inside the cult, 0:22:14.316 --> 0:22:17.196 you win and the cult changes. So it's a little 0:22:17.196 --> 0:22:21.356 different from most cults. And it has had this capacity 0:22:21.396 --> 0:22:24.636 to kind of phase change in a way that cults 0:22:24.916 --> 0:22:27.996 normally don't. They start up trying to save you poor 0:22:28.076 --> 0:22:31.196 children in Africa, and they end up worrying about human 0:22:31.236 --> 0:22:33.876 beings the trillion years from now living on Mars. I 0:22:33.916 --> 0:22:37.636 think of them as completely sincere, generally pretty sweet natured, 0:22:38.356 --> 0:22:42.796 devoted to logic and reason and argument, and somehow it 0:22:42.836 --> 0:22:44.836 has the capacity still to run off the rails. 0:22:45.436 --> 0:22:48.196 Did they respect Sam or did they just love him 0:22:48.196 --> 0:22:48.796 for his money? 0:22:49.196 --> 0:22:51.716 I think they felt about Sam the way Sam's parents 0:22:51.716 --> 0:22:54.996 felt about Sam. They were scared both for and of him, 0:22:55.596 --> 0:23:00.196 and they were interestingly, even in good times, a little 0:23:00.236 --> 0:23:03.356 worried about him being too closely identified with the movement, 0:23:03.396 --> 0:23:05.356 because he became kind of the face of the movement. 0:23:05.756 --> 0:23:08.236 I think they smelled the existential risk to the movement. 0:23:08.636 --> 0:23:10.676 He became too important to them. 0:23:10.956 --> 0:23:13.956 How bad has his downfall been for them? 0:23:14.116 --> 0:23:16.956 I don't know how. With the recruiting numbers in the 0:23:16.996 --> 0:23:19.836 Stanford and Princeton and Harvard and MIT math and physics 0:23:19.876 --> 0:23:22.716 departments are looking like these days can have been good? 0:23:23.476 --> 0:23:26.516 Can have been good? My guess is it causes a 0:23:26.516 --> 0:23:28.876 bit of a retrenchment in how they think about what 0:23:28.916 --> 0:23:32.076 they're doing. I think that back in the day, when 0:23:32.076 --> 0:23:35.676 it was just being more intellectually rigorous about what you 0:23:35.716 --> 0:23:39.716 did with charitable dollars, it was pretty unobjectionable. Where I 0:23:39.716 --> 0:23:42.156 find the whole thing jumps the shark is the earn 0:23:42.236 --> 0:23:45.036 to give idea. I'm not quite sure why I feel 0:23:45.036 --> 0:23:47.476 this way, but the whole idea that to stop trying 0:23:47.476 --> 0:23:50.756 to do good yourself and maximize the dollars you make 0:23:50.796 --> 0:23:53.316 and pay someone else to do good with them. There's 0:23:53.356 --> 0:23:58.876 something about divorcing charitable acts from human sympathy that feels 0:23:58.876 --> 0:23:59.676 a little weird to me. 0:24:00.396 --> 0:24:03.316 There's this concept. I think it's mostly in psychology, but 0:24:03.356 --> 0:24:06.076 others use it called moral licensing. It's this idea that 0:24:06.076 --> 0:24:09.556 if you're doing something great for people or the world, 0:24:09.636 --> 0:24:12.476 in one corner of your life, you give yourself licensed 0:24:12.476 --> 0:24:15.596 to lie or cheat or steal whatever. In another corner. 0:24:16.476 --> 0:24:19.836 Do you think that he felt that because he's making 0:24:19.876 --> 0:24:22.316 money in the service of effective altruism, which is going 0:24:22.396 --> 0:24:26.716 to use money to solve potentially existential problems, that that 0:24:26.916 --> 0:24:29.556 just trumped everything else, And that if he needed to 0:24:29.596 --> 0:24:33.556 be deceitful or withhold information, etc. That he's still kind 0:24:33.556 --> 0:24:35.276 of in the plus column because of the big one. 0:24:35.916 --> 0:24:39.516 Yes, I think so he wouldn't put it that way. 0:24:40.116 --> 0:24:42.396 I'm trying to think how he would put it, but 0:24:42.556 --> 0:24:45.316 the effect is the same. This is the whole business 0:24:45.316 --> 0:24:49.716 of replacing principles with probabilities. There are no firm, fixed 0:24:49.876 --> 0:24:54.436 rules that he will obey. So why does he allow 0:24:54.516 --> 0:24:58.156 himself to move through the world without obeying firm fixed rules. 0:24:58.676 --> 0:25:03.876 It's because he thinks this larger goal justifies it. He 0:25:03.916 --> 0:25:07.436 figures out as a kid or as pretty young person, 0:25:08.196 --> 0:25:11.036 that he has the ability to do harm because he 0:25:11.076 --> 0:25:14.516 doesn't feel what other people feel. It's a bit like 0:25:14.636 --> 0:25:17.196 if you didn't feel pain, you're more likely like put 0:25:17.196 --> 0:25:19.716 your hand on the stove and burn it off. He's 0:25:19.796 --> 0:25:24.036 lacking some essential human equipment that would constrain. 0:25:23.676 --> 0:25:25.676 His behavior, and he knows it. 0:25:25.836 --> 0:25:29.996 And he knows it, and so when he discovers a rule, 0:25:30.076 --> 0:25:32.836 he can give himself our goal he can give himself, 0:25:32.916 --> 0:25:37.156 and the goal seems noble, lower the existential risk to humanity, 0:25:37.236 --> 0:25:40.076 save human lives. In a way, He's trying to put 0:25:40.156 --> 0:25:43.876 some constraint on the harms he creates. But I do 0:25:43.916 --> 0:25:46.836 think moral licensing will do as an explanation. 0:25:47.276 --> 0:25:50.476 I'm curious to know what the effective altruists make of 0:25:50.516 --> 0:25:54.396 someone like Bill Gates. He's spent the past ten fifteen 0:25:54.436 --> 0:25:57.276 years spending billions of dollars trying to do what looks 0:25:57.276 --> 0:25:59.476 to me like a version of what they want to do, 0:25:59.556 --> 0:26:02.356 and there have been people throughout history trying to do 0:26:02.436 --> 0:26:05.596 similar things. What do you see as the biggest distinction 0:26:05.796 --> 0:26:08.636 between Gates and the effective altruists. 0:26:08.716 --> 0:26:11.836 Degree of fanaticism and rigor. I mean, I think Gates 0:26:11.876 --> 0:26:13.716 does a lot of things other than just try to 0:26:13.756 --> 0:26:17.316 maximize the lives saved with his dollars. But I think 0:26:17.316 --> 0:26:20.116 the eas would tell you that Gates is the closest 0:26:20.116 --> 0:26:22.796 thing to an EA who's not an EA. They're probably 0:26:22.836 --> 0:26:25.076 dollars that Bill Gates have given to museums that would 0:26:25.076 --> 0:26:28.636 disturb them because they're a dollar given to a museum 0:26:28.796 --> 0:26:31.076 is a dollar wasted in their minds. 0:26:31.956 --> 0:26:35.716 Coming up after the break, another way to waste dollars. 0:26:36.156 --> 0:26:38.556 If you give Donald Trump five billion dollars not to 0:26:38.636 --> 0:26:40.316 run for president, what do you think he's going to do? 0:26:40.796 --> 0:26:43.876 I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. 0:27:02.516 --> 0:27:06.516 Sam Bankman Free didn't buy a yacht or have expensive 0:27:06.556 --> 0:27:09.716 tastes on most of the normal dimensions, but he did 0:27:09.716 --> 0:27:12.756 spend a lot of money in the political arena. Some 0:27:12.836 --> 0:27:17.316 of this went toward influencing cryptocurrency regulation in the US, 0:27:17.436 --> 0:27:21.476 which would have let his FTX Exchange expand its business, 0:27:22.396 --> 0:27:25.836 but his political spending went in other directions too. Here 0:27:25.916 --> 0:27:29.276 again is Michael Lewis, author of Going Infinite. 0:27:29.716 --> 0:27:33.676 So he spends ten million dollars in an Oregon Democratic 0:27:33.716 --> 0:27:37.716 primary on a candidate named Carrick Flynn. Sam identifies him 0:27:37.716 --> 0:27:41.196 because he is an effective altruist who's expert in pandemic 0:27:41.236 --> 0:27:44.996 prevention without paying any attention to his viability as a candidate, 0:27:45.036 --> 0:27:49.156 and Carrick Flynn has, among other traits, fear of public speaking, deeply, 0:27:49.316 --> 0:27:53.636 deeply insecure, and upset when people say something critical about him. 0:27:53.996 --> 0:27:56.436 Lots of things that would be red flags in a 0:27:56.436 --> 0:27:57.396 political candidate. 0:27:57.876 --> 0:27:58.756 Was he from Oregon? 0:27:58.796 --> 0:28:01.316 At least he was a carbon bagger. I think he'd 0:28:01.316 --> 0:28:03.876 spent time there, but he'd basically been living in Washington 0:28:03.916 --> 0:28:07.036 for a long stretch. And Carrick Flynn ends up winning 0:28:07.236 --> 0:28:09.436 I don't know, twenty percent of the vote. That's one 0:28:09.476 --> 0:28:11.476 bucket of Sam Beckmer free spending is trying to get 0:28:11.476 --> 0:28:16.036 candidates into Congress or encourage actually elected representatives to take 0:28:16.076 --> 0:28:18.196 more interest in things like pandemic prevention. 0:28:18.676 --> 0:28:20.236 How would you rank on a scale of zerre to 0:28:20.236 --> 0:28:23.276 attend how much Sam actually cared about that issue? 0:28:23.636 --> 0:28:25.636 A lot nine and a half. 0:28:26.036 --> 0:28:29.116 And this was happening during COVID already, correct. 0:28:29.316 --> 0:28:32.156 Well, it just seemed like the one thing that's obvious 0:28:32.196 --> 0:28:35.276 to do is to build some equivalent of the National 0:28:35.276 --> 0:28:40.516 Weather Service for disease, global pathogen prediction and detection. And 0:28:40.596 --> 0:28:42.316 he was interested, not only interested in that, he was 0:28:42.356 --> 0:28:44.596 actually putting money into it. And I thought that's interesting. 0:28:45.476 --> 0:28:49.236 Alongside that Sam had decided all by himself, and much 0:28:49.276 --> 0:28:52.836 to the chagrin of other effective altruists, that Donald Trump 0:28:52.916 --> 0:28:56.676 presented a threat to democracy. Democracy was the most likely 0:28:56.796 --> 0:29:01.076 tool for addressing existential risk to humanity. So therefore Donald 0:29:01.076 --> 0:29:03.916 Trump needed to be stopped, and so he poured lots 0:29:03.956 --> 0:29:07.276 of money into anti Trump's stuff, and he did it. 0:29:07.316 --> 0:29:10.876 I think mainly through Mitch McConnell influenced packs and the 0:29:10.996 --> 0:29:16.396 idea there was to find, especially in Republican primaries, candidates 0:29:16.556 --> 0:29:19.756 who were not real Trumpers. Everybody was seeming to be 0:29:19.756 --> 0:29:23.076 a Trumper, and McConnell had distinguished between the people who 0:29:23.116 --> 0:29:25.316 really thought the election was rigged from the people who 0:29:25.396 --> 0:29:28.556 just say it, and the latter were maybe more likely 0:29:28.596 --> 0:29:29.796 to govern responsibly. 0:29:30.196 --> 0:29:33.316 And what's your sense of efficacy in that realm, if 0:29:33.356 --> 0:29:33.916 any at all? 0:29:34.476 --> 0:29:37.516 You know, it's funny. I don't know how influential the 0:29:37.596 --> 0:29:39.796 money was, though I think it was some tens of 0:29:39.836 --> 0:29:44.076 millions of dollars. But I did have a glimpse of 0:29:44.156 --> 0:29:48.556 Sam bankman Fried's style meddling. He's going to gamey meddling 0:29:48.796 --> 0:29:52.196 in this process. At the moment that we had this conversation, 0:29:52.436 --> 0:29:56.756 he was taking an interest in the Missouri Senate primary. 0:29:57.236 --> 0:30:00.596 There were two candidates at that time who seemed especially viable. 0:30:01.076 --> 0:30:05.316 Both were named Eric Eric Schmidt and Eric Britons. Eric 0:30:05.356 --> 0:30:08.916 Britons was a full throated Trumper. Eric Smith seemed to 0:30:08.916 --> 0:30:12.316 be taking it, at least so said McConnell's people. And 0:30:12.636 --> 0:30:16.516 Sam told me this isn't a private conversation. That his 0:30:16.836 --> 0:30:20.156 political operation had been having conversations with the Trump political 0:30:20.196 --> 0:30:23.156 operation because they were afraid Trump was going to jump 0:30:23.156 --> 0:30:26.116 into this race and endorse Eric Britons, the real Trumper, 0:30:26.396 --> 0:30:28.756 and that that would actually put Britons over the top. 0:30:29.316 --> 0:30:31.116 So they were trying to think of ways to stop 0:30:31.196 --> 0:30:34.436 this from happening, and they came up with this idea 0:30:34.476 --> 0:30:36.996 that they would tell Trump that just come out and 0:30:36.996 --> 0:30:40.516 say he was for Eric, without specifying which Eric, because 0:30:40.596 --> 0:30:43.316 both the candidates were named Eric, and that the argument 0:30:43.356 --> 0:30:45.556 to Trump was one it would be funny and be 0:30:45.596 --> 0:30:47.996 a meme and everybody would talk about it. And the 0:30:48.076 --> 0:30:50.636 second was he didn't care which Eric won. All he 0:30:50.716 --> 0:30:53.436 cared was that he backed the winner. So Sam's telling 0:30:53.436 --> 0:30:55.116 me this and I've said, how g real could this be? 0:30:55.516 --> 0:30:57.436 In the same breath he's telling me that he's offering 0:30:57.476 --> 0:30:59.756 Donald Trump five billion dollars not to run for president, 0:31:00.556 --> 0:31:03.036 And two days later, Trump comes out on True Social 0:31:03.196 --> 0:31:05.636 and says I'm for Eric, and indeed it was a meme, 0:31:05.676 --> 0:31:08.436 and indeed everybody thought it was funny, and indeed diffused 0:31:08.516 --> 0:31:11.116 Trump's in luence, and indeed Eric Schmidt won. 0:31:11.596 --> 0:31:15.356 Now you glossed over the plan to pay Trump directly 0:31:15.396 --> 0:31:18.036 five billion dollars to not run again in twenty twenty four. 0:31:18.276 --> 0:31:19.196 How real was that? 0:31:19.796 --> 0:31:21.916 I don't know. I could tell you where it was 0:31:22.076 --> 0:31:24.516 when I talked to him about it. It's funny in 0:31:24.556 --> 0:31:28.156 retrospect that he was worried it was illegal. The question 0:31:28.356 --> 0:31:31.196 was is it legal to pay Donald anybody not to 0:31:31.276 --> 0:31:32.116 run for president? 0:31:32.516 --> 0:31:33.996 Did you ever learn the answer that question. 0:31:34.516 --> 0:31:36.636 I haven't learned the answer to that question. Is it 0:31:36.676 --> 0:31:39.916 a bribe? Is it? But the practical point, and this 0:31:39.956 --> 0:31:42.076 is the point I actually made to Sam, I said, 0:31:42.076 --> 0:31:45.556 this is insane. If you give Donald Trump five billion 0:31:45.596 --> 0:31:47.356 dollars not to run for president, what do you think 0:31:47.356 --> 0:31:49.636 he's going to do? You know what he's going to do. 0:31:49.676 --> 0:31:51.396 He's going to take the five billion dollars and he's 0:31:51.396 --> 0:31:53.516 going to run for president. This is not like an 0:31:53.596 --> 0:31:57.716 enforceable contract. And it never I know that they had 0:31:57.716 --> 0:31:58.676 the conversations. 0:31:59.196 --> 0:32:01.356 Do you know at what level of the Trump organization 0:32:01.436 --> 0:32:02.796 or campaign he was speaking with. 0:32:03.316 --> 0:32:05.516 If I had to guess, we got to qualify that. 0:32:05.556 --> 0:32:09.956 I'm guessing that the CEO of FTX Digital Markets was 0:32:09.956 --> 0:32:13.996 a fellow named Ryan Salem, and Ryan Salem was Republican 0:32:14.156 --> 0:32:18.156 and apparently very friendly with Donald Trump Junior, and I 0:32:18.196 --> 0:32:21.556 had the impression that the conversation was happening between those two, 0:32:22.396 --> 0:32:25.556 but I don't know if that's true. Whatever channel it 0:32:25.676 --> 0:32:27.796 was was the same channel that got Trump to say 0:32:27.796 --> 0:32:31.036 I'm for Eric, so we know the channel exists. The 0:32:31.116 --> 0:32:34.036 question is could that ever have happened in real life? 0:32:34.476 --> 0:32:35.996 And I'm not sure it could ever have happened in 0:32:36.036 --> 0:32:37.756 real life. But it was a really good example of 0:32:37.756 --> 0:32:41.476 Sam Bekman Freed addressing a problem. It's like pretty original thought, 0:32:41.556 --> 0:32:42.476 pay him not to run? 0:32:44.916 --> 0:32:48.596 So would it have been illegal for Sam Bekman Free 0:32:48.636 --> 0:32:51.516 to pay Donald Trump five billion dollars to not run 0:32:51.676 --> 0:32:55.676 for president? The UK has a law that forbids, payment 0:32:55.836 --> 0:32:58.996 or promise of payment to get a candidate to withdraw 0:32:59.156 --> 0:33:01.996 from an election. In the US, it is less clear. 0:33:02.116 --> 0:33:04.916 People have been sent to prison for paying candidates to 0:33:05.036 --> 0:33:08.876 drop out, but in those cases the crimes were violations 0:33:08.916 --> 0:33:14.276 of campaign finance disclosure requirements, not the payments themselves. It 0:33:14.396 --> 0:33:17.596 is also against US law to bribe a public official 0:33:17.676 --> 0:33:21.196 to influence a quote official act, but it's not clear 0:33:21.236 --> 0:33:25.316 that running for office counts as an official act. Whatever 0:33:25.356 --> 0:33:28.436 the case, it's pretty clear that Sam Bankman Freed didn't 0:33:28.476 --> 0:33:32.156 have the chance to pay Donald Trump five billion dollars 0:33:32.196 --> 0:33:35.596 not to run. It's also worth noting that his mother, 0:33:35.836 --> 0:33:38.876 Barbara Freed, may have inspired this idea. 0:33:39.796 --> 0:33:42.876 Before Sam got rich. She had built a political operation. 0:33:43.276 --> 0:33:45.756 They were trying to find smarter ways to give money away, 0:33:45.956 --> 0:33:49.396 and it was pretty explicitly anti Trump. So Sam's first 0:33:49.396 --> 0:33:50.596 donations are through her. 0:33:51.076 --> 0:33:54.796 So You've said a couple things about Sam's parents that 0:33:54.876 --> 0:33:58.156 I find really interesting. They're in the book very you know, 0:33:58.196 --> 0:34:01.916 they're kind of often there but below the surface. Can 0:34:01.956 --> 0:34:05.716 you just draw out that relationship and tell me, you know, 0:34:05.876 --> 0:34:09.636 which directions the emotions flow these days, and what those 0:34:09.676 --> 0:34:10.476 emotions may be. 0:34:11.196 --> 0:34:14.076 I think one of the unusual things about the relationship 0:34:14.116 --> 0:34:17.356 between the parents and the child was the parents pretty 0:34:17.436 --> 0:34:20.076 quickly gave up on the idea he was a child. 0:34:20.316 --> 0:34:23.676 I remember Sam's mom, Barbara telling me that he was 0:34:23.796 --> 0:34:25.876 I don't know, eight years old and she had just 0:34:25.916 --> 0:34:29.196 written some abstruse paper for some academic journal, and he 0:34:29.276 --> 0:34:31.716 asks her what it's about, and she sort of humors him, 0:34:31.796 --> 0:34:34.316 but he pushes and presses, and she actually tells him 0:34:34.316 --> 0:34:37.556 what it's about, and she says his responses were smarter 0:34:37.676 --> 0:34:40.356 than the responses she got from the peer review. Couple 0:34:40.436 --> 0:34:45.356 with they made some brief pass at doing childish things 0:34:45.396 --> 0:34:47.916 with him. She took him to an amusement park and 0:34:47.956 --> 0:34:49.996 she was kind of hauling him from ride to ride 0:34:50.276 --> 0:34:52.236 and at some point she sees he's looking at her 0:34:52.236 --> 0:34:54.916 and just observing her, and he says, are you having 0:34:54.956 --> 0:34:55.436 fun yet? 0:34:55.476 --> 0:34:55.756 Mom? 0:34:56.276 --> 0:34:59.156 They both had the story in their head again even 0:34:59.196 --> 0:35:02.356 in good times, back when Sam was a billionaire, that 0:35:02.436 --> 0:35:05.476 he just he wasn't suited to childhood. He didn't connect 0:35:05.476 --> 0:35:08.196 with other people. What scared them, I think was he 0:35:08.196 --> 0:35:10.676 didn't fit into the world. They were really worried he 0:35:10.676 --> 0:35:12.756 would find no place for himself in the world. They 0:35:12.796 --> 0:35:14.916 thought his little brother was going to be fine and 0:35:15.196 --> 0:35:18.036 you know, might be a shining star. They thought Sam 0:35:18.116 --> 0:35:21.916 was never going to like work out because he was 0:35:21.956 --> 0:35:26.316 so socially maladjusted and indifferent. It was indifferent, like indifferent 0:35:26.356 --> 0:35:30.796 to any kind of social interaction. They were then bewildered 0:35:31.356 --> 0:35:34.196 when this child of theirs, is discovered by Jane Street 0:35:34.196 --> 0:35:37.476 and high frequency Trading as God's gift to trading, and 0:35:37.596 --> 0:35:39.996 all of a sudden is endowed with a new identity 0:35:40.276 --> 0:35:44.916 I made for the new financial markets, and then further 0:35:45.116 --> 0:35:49.556 perplexed when he quits that and becomes cryptobillionaire. Like they 0:35:49.556 --> 0:35:53.556 just find it completely implausible, just preposterous that he was 0:35:53.596 --> 0:35:56.836 in the position he was in, but accepted, right, you know, 0:35:57.076 --> 0:36:01.156 that's what happened to Sam now. I mean, obviously they're devastated. 0:36:01.476 --> 0:36:04.716 If I had to guess, they have slightly different views 0:36:04.716 --> 0:36:07.996 of the situation, But the mother is more vocal about 0:36:07.996 --> 0:36:13.516 her views, and I bet right now that she views 0:36:13.836 --> 0:36:17.516 Sam as chiefly a victim. That she thinks he's completely 0:36:17.516 --> 0:36:19.796 innocent of all wrongdoing, and she hasn't asked him what 0:36:19.836 --> 0:36:22.356 he did, so she doesn't know. She hasn't really pushed 0:36:22.396 --> 0:36:26.156 him on it. The truth of the relationship. And this 0:36:26.236 --> 0:36:29.476 is what I think the media generally in the commentary 0:36:29.716 --> 0:36:33.596 gets wrong, is that it, from Sam's point of view, 0:36:33.716 --> 0:36:36.756 was not that close. If you talk to the person 0:36:36.836 --> 0:36:39.996 who ran Sam's scheduling, she'd say the hardest part of 0:36:40.036 --> 0:36:42.276 my week is when one of his parents calls him, 0:36:42.276 --> 0:36:44.276 what's fifteen minutes with him? And I have to lie 0:36:44.316 --> 0:36:46.476 to him because I know Sam doesn't want to do it. 0:36:46.956 --> 0:36:51.236 That Sam kept them really at arm's length and didn't 0:36:51.316 --> 0:36:55.476 welcome their intrusion into his life. And the exception being 0:36:55.556 --> 0:36:57.116 is when he gets in trouble, like when he gets 0:36:57.156 --> 0:36:59.196 in trouble and there's no one else there. But I 0:36:59.196 --> 0:37:02.996 think it probably drives him crazy that first he's back 0:37:02.996 --> 0:37:05.956 in his parents' home under house arrest, and now the 0:37:05.996 --> 0:37:08.036 only people who visited him in jail are his parents. 0:37:08.436 --> 0:37:11.956 I don't think he welcomes parroting. He's never engaged with 0:37:12.036 --> 0:37:16.116 that relationship, so they're sort of imposing their parenting on 0:37:16.276 --> 0:37:20.476 him still and our heartbroken because he's their child and 0:37:20.476 --> 0:37:21.316 they love him. 0:37:21.556 --> 0:37:24.716 A listener wrote in to ask when do Sam Bankmin 0:37:24.756 --> 0:37:26.796 Freed's parents get indicted. 0:37:27.436 --> 0:37:29.276 I don't think the parents had a whole lot of 0:37:29.276 --> 0:37:32.196 insight into the In fact, I know they didn't. I 0:37:32.196 --> 0:37:35.356 would go from an interview with Sam or spending the 0:37:35.476 --> 0:37:39.756 day at the FTX headquarters, occasionally having dinner with the parents, 0:37:40.116 --> 0:37:42.716 and they were desperate for any kind of information about 0:37:42.756 --> 0:37:44.876 what was going on because they had no idea, like 0:37:44.996 --> 0:37:48.756 no idea. What looks probably more damning than it is 0:37:48.876 --> 0:37:51.716 but in retrospect, is that he bought this house in 0:37:51.716 --> 0:37:54.236 the Bahamas and put it in their name. But they were, 0:37:54.356 --> 0:37:57.276 like I promise you, they were only vaguely aware that 0:37:57.316 --> 0:37:59.836 they owned it. They didn't furnish it, they didn't care 0:37:59.876 --> 0:38:02.876 about it, and they gave it back right after it 0:38:02.916 --> 0:38:04.636 all fell apart that they couldn't get rid of it 0:38:04.676 --> 0:38:07.356 fast enough. What the dad was doing, he was mainly 0:38:07.356 --> 0:38:10.236 involved in the philanthropy. He was doing things like working 0:38:10.236 --> 0:38:13.116 with the Bahamas government to make sure that people who 0:38:13.116 --> 0:38:16.436 were in the psychiatric hospital had more contact with human 0:38:16.476 --> 0:38:19.516 beings outside the psychiatric He was really working full time 0:38:19.796 --> 0:38:22.156 as a do gooder. But I don't think either one 0:38:22.236 --> 0:38:31.636 of them are meaningfully evolved in the business. 0:38:28.636 --> 0:38:32.516 We should say. Joe Bankman and Barbara Fried currently face 0:38:32.636 --> 0:38:35.356 a civil lawsuit alleging that they are not as innocent 0:38:35.396 --> 0:38:38.796 as Michael Lewis claims. The suit argues that they quote 0:38:38.876 --> 0:38:42.876 exploited their access and influence within the FTX enterprise to 0:38:42.996 --> 0:38:48.036 enrich themselves. In any case, I did wonder what might 0:38:48.076 --> 0:38:50.676 have happened if one of Sam Bankman Fried's parents had 0:38:50.756 --> 0:38:54.876 been more involved in FTX, or if not them, some 0:38:55.076 --> 0:38:59.076 other potentially competent people who might have served as the 0:38:59.116 --> 0:39:03.716 adults in the room. Bankmin Freed had big plans for 0:39:03.996 --> 0:39:07.996 FTX and for himself. I asked Michael Lewis, if with 0:39:08.156 --> 0:39:12.276 the right help, Bankman Freed could have achieved those plans 0:39:12.436 --> 0:39:14.196 and avoided the law breaking. 0:39:14.796 --> 0:39:18.996 Yes. What stops it from happening right from the get 0:39:19.036 --> 0:39:23.196 go is Sam Bankman Freed's hostility to grown ups, including 0:39:23.196 --> 0:39:26.116 his parents. He took the view that basically everybody over 0:39:26.156 --> 0:39:28.036 the age of thirty five was a waste of time. 0:39:28.556 --> 0:39:31.636 And it's a very funny view he had. He's sort 0:39:31.636 --> 0:39:34.556 of in his mind in his judgment of people, he 0:39:34.676 --> 0:39:38.676 sort of punishes them for having any experience. He prefers 0:39:38.756 --> 0:39:41.876 people without experience who are just thinking about problems from 0:39:41.916 --> 0:39:44.556 the ground up, because he thinks of experience as kind 0:39:44.596 --> 0:39:48.436 of almost polluting their judgment. And what older people have, 0:39:48.476 --> 0:39:51.436 they have experience. But yes, if you twist the dial 0:39:51.476 --> 0:39:55.076 on Sam Bangner Freed's risk tolerance just a little bit, yes, 0:39:55.156 --> 0:39:57.036 there's like an army of accountants who are there at 0:39:57.036 --> 0:39:59.076 the beginning and the money is put in the right place, 0:39:59.116 --> 0:40:01.956 and so he's never tempted to use it, and he 0:40:02.036 --> 0:40:04.836 was pursuing a strategy which was probably viable, which was 0:40:04.876 --> 0:40:08.956 to be the legit crypto exchange, acquiring licenses left and right. 0:40:09.116 --> 0:40:11.356 They were growing fast. There was a billion dollars in 0:40:11.396 --> 0:40:13.076 revenue even the year they collapsed. 0:40:14.716 --> 0:40:18.116 One of the few adults in Sam bankman Fried's life 0:40:18.156 --> 0:40:20.756 was a man named George Lerner. He had been Bankman 0:40:20.796 --> 0:40:27.516 Freed's psychiatrist in California. Here's a passage from Going Infinite. 0:40:27.556 --> 0:40:30.316 Sam had long since decided that any discussions about his 0:40:30.316 --> 0:40:34.756 inner life and its consequences for others were futile. The 0:40:34.836 --> 0:40:38.676 social stuff was basically unsolvable. He said, he didn't need 0:40:38.756 --> 0:40:41.516 a therapist to deal with his problems, though he did 0:40:41.596 --> 0:40:45.436 need someone who could prescribe his medications. The problems that 0:40:45.516 --> 0:40:49.876 interested Sam were other people's problems. He soon figured out 0:40:49.916 --> 0:40:52.076 that George could be extremely useful with these. 0:40:52.676 --> 0:40:56.716 And so bankman Fried hired George Lerner and imported him 0:40:56.756 --> 0:40:59.796 to the Bahamas, where he took on a new role 0:40:59.996 --> 0:41:03.196 as a sort of internal consultant at FTX. 0:41:03.636 --> 0:41:05.796 A few months into his new job, George has seen 0:41:05.876 --> 0:41:10.076 one hundred of ftx's three hundred something employees he enjoyed 0:41:10.076 --> 0:41:13.156 maybe the single best view of its corporate architecture, with 0:41:13.236 --> 0:41:18.076 a clarity not available to its investors, its customers, its employees, 0:41:18.596 --> 0:41:22.036 and possibly the person who had created it. In the end, 0:41:22.476 --> 0:41:25.516 George drew up the only internal org chart ever made 0:41:25.516 --> 0:41:29.356 of Sam's sprawling creation. By the time he was done, 0:41:29.636 --> 0:41:34.156 he discovered many interesting things. Twenty four different people thought 0:41:34.196 --> 0:41:37.956 they were reporting directly to Sam. For example, this group 0:41:37.996 --> 0:41:41.956 did not include the chief financial officer because FTX did 0:41:41.956 --> 0:41:45.156 not have a chief financial officer. There was no chief 0:41:45.236 --> 0:41:48.876 risk officer or head of human resources because they had 0:41:48.916 --> 0:41:53.476 none of that either. Then there was Caroline Ellison. Caroline 0:41:53.556 --> 0:41:56.116 was apparently alone in charge of the twenty two traders 0:41:56.116 --> 0:41:58.476 and developers working inside Alometer Research. 0:42:01.156 --> 0:42:04.636 I wanted to ask you about George Lerner. I realized 0:42:04.676 --> 0:42:08.436 that his medical license wasn't valid in the Bahamas, so 0:42:08.476 --> 0:42:11.556 he wasn't at officially as a psychiatrist when he was 0:42:12.356 --> 0:42:16.036 talking to all these people, and therefore these conversations may 0:42:16.076 --> 0:42:20.756 not have been protected under doctor patient confidentiality. Still, I 0:42:20.796 --> 0:42:23.476 am curious why he was willing and able to tell 0:42:23.556 --> 0:42:26.916 you so much about these private conversations. 0:42:27.196 --> 0:42:29.436 I would be a very poor journalist if I ask 0:42:29.556 --> 0:42:31.476 people why they were talking to me. But I will 0:42:31.516 --> 0:42:33.836 tell you this that I knew I had a goal 0:42:33.956 --> 0:42:38.156 mine because he's very smart. He was very insightful. His 0:42:38.236 --> 0:42:42.156 first effective altruist patient was Sam's little brother, then Caroline Ellison, 0:42:42.436 --> 0:42:44.676 and only after a while did Sam become a patient. 0:42:44.996 --> 0:42:47.276 But by the time I meet him, he is serving 0:42:47.316 --> 0:42:51.396 as essentially the psychiatrist to the entire company in the Bahamas. 0:42:51.436 --> 0:42:53.476 They're rolling through his office, laying on his couch and 0:42:53.476 --> 0:42:56.476 complaining about the company. The Bahamas didn't give him a license, 0:42:56.516 --> 0:42:59.516 so at that point he really was just a whatever 0:42:59.596 --> 0:43:03.356 professional coach, and so he wasn't bound by any laws 0:43:03.396 --> 0:43:06.636 of confidentiality. But I never asked him. 0:43:07.676 --> 0:43:11.836 Caroline Ellison, who by twenty twenty two was running Alameda, 0:43:12.276 --> 0:43:15.956 was also Sam Bankman Fried's on again, off again girlfriend. 0:43:16.836 --> 0:43:21.196 During the collapse of FTX, they were off and barely speaking. 0:43:22.156 --> 0:43:26.076 It's tempting to wonder how things might have unwound differently 0:43:26.236 --> 0:43:29.276 if either a they had been speaking at the time, 0:43:29.676 --> 0:43:33.676 or b if Sam Bankman Freed had built an operation 0:43:33.796 --> 0:43:38.316 that didn't revolve around himself and just three other people 0:43:38.356 --> 0:43:43.476 who were the closest approximation he had to friends Caroline Ellison, 0:43:43.596 --> 0:43:47.676 Gary Wang, and Nishad Singh, all three of whom, by 0:43:47.756 --> 0:43:52.356 the way, would testify against him at trial. It took 0:43:52.476 --> 0:43:55.596 the jury just four hours to convict him and seven 0:43:55.636 --> 0:44:00.196 counts of fraud and conspiracy. After the break, Michael Lewis 0:44:00.316 --> 0:44:04.276 attended the trial. It was how to put this, It 0:44:04.396 --> 0:44:08.876 was no moneyball. I'm Stephen Dubner. This is freakonomics. Radio 0:44:09.196 --> 0:44:32.156 be right back. The trial of Sam Bankman Freed began 0:44:32.276 --> 0:44:35.796 on October third in the US District Court in Lower Manhattan. 0:44:36.436 --> 0:44:39.396 The lead up to the trial felt a bit like 0:44:39.556 --> 0:44:43.796 the lead up to a Super Bowl, two teams ready 0:44:43.876 --> 0:44:50.436 for a tense and exciting battle. Instead, it was a blowout. 0:44:51.116 --> 0:44:55.916 Every day it got a bit less exciting, a bit sadder. 0:44:56.756 --> 0:45:01.236 Bankman Freed's closest colleagues turned against him. The jury heard 0:45:01.516 --> 0:45:05.556 a steady stream of obviously incriminating evidence, and when Bankman 0:45:05.596 --> 0:45:09.916 Freed himself took the stand, there just wasn't much there there. 0:45:10.516 --> 0:45:13.956 He frequently said he couldn't recall saying things that others 0:45:13.996 --> 0:45:16.476 had said he said, and that he couldn't recall doing 0:45:16.596 --> 0:45:19.516 things that wouldn't seem at all hard to recall. If 0:45:19.556 --> 0:45:23.556 you were the person doing them. Michael Lewis attended this 0:45:23.636 --> 0:45:24.836 portion of the trial. 0:45:25.356 --> 0:45:27.876 I knew that Sam Bangnerfried marched to the beat of 0:45:27.916 --> 0:45:30.876 his own drum, that he was his own peculiar person, 0:45:30.916 --> 0:45:33.716 with his own peculiar motives for doing these peculiar things 0:45:33.716 --> 0:45:35.076 that he did, and this would have made him such 0:45:35.076 --> 0:45:38.596 an interesting character to write about. I thought, if he 0:45:38.676 --> 0:45:41.796 was going to take the witness stand, he would have 0:45:41.916 --> 0:45:46.836 some strategy, some reason for doing it, and it was 0:45:47.196 --> 0:45:48.356 that was a big mistake. 0:45:48.916 --> 0:45:52.556 So you were not called as a witness in the trial, which, 0:45:52.676 --> 0:45:54.916 I'll be honest surprised me a little bit. Did it 0:45:54.916 --> 0:45:55.476 surprise you. 0:45:56.116 --> 0:45:59.356 My sense is that lawyers are risk averse and they 0:45:59.396 --> 0:46:01.676 don't like to put on the witness stand people they 0:46:01.676 --> 0:46:02.876 can't completely control. 0:46:03.316 --> 0:46:05.036 And why can't you be controlled? Michael? 0:46:05.356 --> 0:46:07.956 The problem is the prosecutors asked me some questions and 0:46:07.956 --> 0:46:09.956 I'd say some things that were pretty damning about Sam, 0:46:09.996 --> 0:46:12.076 but it would open me up to the defense and 0:46:12.076 --> 0:46:14.356 they'd say, I don't know, when you met him, did 0:46:14.356 --> 0:46:16.316 you think he was dishonest? No, I didn't think he 0:46:16.356 --> 0:46:18.956 was dishonest. When men him, I thought he was curiously forthright, 0:46:19.276 --> 0:46:22.036 you know whatever, it was, and I saw this with 0:46:22.116 --> 0:46:25.796 another witness. The prosecution to teed up a person whose 0:46:25.796 --> 0:46:29.036 title was head of product. His name was Ramnik Aurora, 0:46:29.396 --> 0:46:32.916 who was actually Sam's right hand man in making lots 0:46:32.956 --> 0:46:35.076 of the venture capital investments. He didn't have anything to 0:46:35.116 --> 0:46:37.276 do with the product, but he had had his plane ticket, 0:46:37.316 --> 0:46:39.596 he had his hotel room. He thought he was testifying 0:46:39.716 --> 0:46:43.236 right after Nashad Sing and they canceled him last minute. 0:46:43.676 --> 0:46:45.756 And I think I could be wrong about this. It's 0:46:45.756 --> 0:46:47.716 possible to cancel me because he just decided they didn't 0:46:47.756 --> 0:46:50.116 need him. But I think between the time they teed 0:46:50.196 --> 0:46:52.196 him up and the time they called him, they read 0:46:52.236 --> 0:46:55.076 my book and they saw that he presented the same 0:46:55.156 --> 0:46:58.156 kind of problem I would present, because yes, he could 0:46:58.156 --> 0:47:00.556 tell you about how Sam continued to spend lots of 0:47:00.596 --> 0:47:02.836 money even after he should have been aware that he 0:47:02.876 --> 0:47:05.876 was spending the customer's money. But there's this moment in 0:47:05.916 --> 0:47:07.916 the book that I think is very revealing. And they 0:47:07.916 --> 0:47:10.916 didn't get any attention to the trial. When it all 0:47:10.956 --> 0:47:15.036 blows up in early November of last year and Caroline 0:47:15.036 --> 0:47:17.876 Ellison and Sam Bankman Freedom and a Shad Singer and 0:47:17.916 --> 0:47:20.156 Gary Wang or interroom trying to figure out how much 0:47:20.196 --> 0:47:23.356 money they have to give customers their deposits back, and 0:47:23.516 --> 0:47:26.156 they call Romnick over, and Romick walks into the room 0:47:26.356 --> 0:47:28.756 and he says, they are literally like trying to figure 0:47:28.756 --> 0:47:31.276 out which exchanges they have accounts on where do they 0:47:31.316 --> 0:47:34.796 have bank accounts? And Roomick's phone rings and it's from 0:47:34.876 --> 0:47:37.676 a bank delf Tech in Bahamas, and the guy is 0:47:37.716 --> 0:47:39.356 on the other a line says to Romnick. He says, 0:47:39.356 --> 0:47:40.956 I see you guys in trouble. You should know you 0:47:40.996 --> 0:47:42.956 have you have an account here with three hundred million 0:47:42.996 --> 0:47:45.356 dollars if you need it. And Ramick says this to them, 0:47:45.396 --> 0:47:47.636 and none of them have any idea of it, and 0:47:47.716 --> 0:47:50.756 the pure chaos of the thing again, it's like a 0:47:50.796 --> 0:47:53.276 witness who has when you've been that close. You have 0:47:53.316 --> 0:47:55.476 evidence for both sides, and neither side wants you to 0:47:55.516 --> 0:47:56.396 hear both sides. 0:47:56.836 --> 0:47:59.756 So as you're describing, it strikes me that what you 0:47:59.956 --> 0:48:04.516 have is just a different category of information than the 0:48:04.636 --> 0:48:06.796 kind of information that is useful at a trial for 0:48:06.876 --> 0:48:10.916 either side. Let's say, yes, that's true, but it also 0:48:11.516 --> 0:48:13.836 it just makes me wonder what it's like for you. 0:48:13.836 --> 0:48:17.156 You were sitting here watching a live criminal trial that 0:48:17.316 --> 0:48:20.716 is essentially based on a book that you wrote. We've 0:48:20.756 --> 0:48:22.316 all heard what it's like to write a book and 0:48:22.316 --> 0:48:25.516 then see the movie based on it, and you've had 0:48:25.556 --> 0:48:28.716 more experience with that than most people. And the expectation 0:48:29.476 --> 0:48:32.236 is that the movie will, of course be very different 0:48:32.236 --> 0:48:36.356 from the book. But this was differently different. So what 0:48:36.516 --> 0:48:37.556 was the experience like? 0:48:37.876 --> 0:48:40.476 It's funny you draw that analogy, because it was similar 0:48:40.556 --> 0:48:43.396 in this way. When someone takes one of your books 0:48:43.396 --> 0:48:46.036 and turns it into a movie, they compress it, they 0:48:46.076 --> 0:48:48.196 distort it, and they compress it, and you just hope 0:48:48.196 --> 0:48:50.596 they don't lose the spirit of it. Right, They're turning 0:48:50.636 --> 0:48:53.156 one hundred thousand words into an eight thousand words script, 0:48:53.196 --> 0:48:55.556 so they're bound to leave all kinds of stuff out, 0:48:55.676 --> 0:48:57.836 and you hope when you watch it feels the way 0:48:58.676 --> 0:49:00.316 you felt when you wrote the Thing. 0:49:00.836 --> 0:49:03.116 And the movies that have been made from your books, 0:49:03.156 --> 0:49:06.636 like The Big Short, Moneyball, The blind Side, I gather 0:49:07.236 --> 0:49:10.476 that from your perspective, those were successfully done. 0:49:10.556 --> 0:49:13.356 Yes, I felt in each case that more or less 0:49:13.356 --> 0:49:15.996 the spirit of the thing was preserved and the movies 0:49:16.036 --> 0:49:19.076 weren't boring. In the trial, I felt the spirit of 0:49:19.116 --> 0:49:21.956 the thing was more distorted than the movies distorted. And 0:49:22.116 --> 0:49:25.716 also the thing that was striking in the trial. We 0:49:25.836 --> 0:49:28.276 take it for granted in our legal system, these plea 0:49:28.316 --> 0:49:32.116 bargaining agreements, they're essentially corrupt. I mean, they're very useful 0:49:32.196 --> 0:49:34.956 tools for prosecutors, but essentially the prosecutors are able to 0:49:34.996 --> 0:49:37.756 pay people with years of their lives to say stuff 0:49:37.756 --> 0:49:40.876 on a witness stand so long as it's not falsifiable, 0:49:41.316 --> 0:49:43.756 if it serves the purpose of the prosecutors, they get 0:49:43.756 --> 0:49:44.596 rewarded for it. 0:49:44.996 --> 0:49:46.116 What's it for instance? Here? 0:49:46.716 --> 0:49:50.116 For instance here is it was a pretty common pattern 0:49:50.196 --> 0:49:54.196 in the three principal witnesses was how they felt at 0:49:54.236 --> 0:50:00.516 the time. Nishad saying was telling a story about how 0:50:00.636 --> 0:50:04.596 dark and miserable he was a year ago, and that 0:50:04.676 --> 0:50:08.156 he was aware that they were doing wrong things. And 0:50:08.436 --> 0:50:11.236 I interview this an up and down. He was giddy 0:50:11.276 --> 0:50:13.396 with how things were going, and he would say things 0:50:13.476 --> 0:50:16.116 to me. I mean, in the book, he says, back 0:50:16.156 --> 0:50:18.756 in twenty eighteen, when he's twenty one years old and 0:50:18.876 --> 0:50:21.836 joining Sam Banknerfried in the crypto trading firm, he says, 0:50:21.876 --> 0:50:24.516 how quickly he figures out that the law isn't what's 0:50:24.516 --> 0:50:26.116 written in the laws which you can get away with 0:50:26.156 --> 0:50:28.236 and which you can't get away with. He's saying things 0:50:28.236 --> 0:50:30.436 to me that you don't say if you're feeling at 0:50:30.476 --> 0:50:33.156 all worried that people are going to suspect you're doing 0:50:33.236 --> 0:50:37.676 a bad thing. So they were able to misremember their 0:50:37.716 --> 0:50:41.036 states of mind, and the states of mind they described 0:50:41.116 --> 0:50:44.956 themselves having been in were alien to anybody who observed 0:50:44.956 --> 0:50:45.796 them at the time. 0:50:46.236 --> 0:50:49.396 Were you really surprised that there is that trade off 0:50:49.436 --> 0:50:51.236 for sort of bribing as you're describing it. 0:50:51.636 --> 0:50:53.996 Well, I knew it existed, right, It was just watching 0:50:54.036 --> 0:50:56.356 the effects of it. You know, we get our legal 0:50:56.396 --> 0:50:58.556 system from the English, and the English are shocked we 0:50:58.596 --> 0:51:02.036 allow this. It's not obvious that we should. It was 0:51:02.116 --> 0:51:04.756 viewed as corrupt until not that long ago. It's now 0:51:04.796 --> 0:51:08.116 just bewoven into the texture of our criminal justice process. 0:51:08.516 --> 0:51:10.276 If I was sitting in the jury box, I would 0:51:10.316 --> 0:51:13.796 certainly have convicted. But when you back away from it 0:51:13.996 --> 0:51:18.156 and you see just how uneven the playing field is 0:51:18.676 --> 0:51:22.876 between the prosecutors in the defense. The prosecutors have unlimited resources. 0:51:22.996 --> 0:51:26.876 They have power to scare people into testifying. They getting 0:51:26.876 --> 0:51:29.556 cut plea deals with people. You see why the stats 0:51:29.596 --> 0:51:30.796 are as shocking as they are. 0:51:31.196 --> 0:51:33.316 You mean the conviction stats. 0:51:33.356 --> 0:51:36.196 Last year, ninety nine point six percent of the people 0:51:36.356 --> 0:51:39.956 who were charged with federal crimes either pled guilty or convicted. 0:51:40.396 --> 0:51:45.076 So why did bankman Fried testify himself when so many 0:51:45.116 --> 0:51:47.836 of his answers were essentially I don't recall. 0:51:48.156 --> 0:51:51.116 It's a great question, go back even further, knowing what 0:51:51.196 --> 0:51:55.076 he supposedly knew. Why did he stay in the Bahamas 0:51:55.076 --> 0:51:56.676 when it all fell apart? If you just gone to 0:51:56.716 --> 0:51:58.916 Dubai still be there, did. 0:51:58.756 --> 0:52:00.076 You ask him that why he stayed? 0:52:00.516 --> 0:52:02.276 Yeah, yeah, yeah, I mean I can tell you what 0:52:02.316 --> 0:52:04.636 he said. He said because I didn't do anything wrong. 0:52:05.116 --> 0:52:06.876 I mean, if you wanted the answer to all those 0:52:06.956 --> 0:52:09.636 questions is because he thinks he did nothing wrong. He 0:52:09.676 --> 0:52:13.236 thinks that his error was not paying attention. That's the 0:52:13.316 --> 0:52:16.876 story he's told himself. The prosecutors, I think, were maybe 0:52:16.916 --> 0:52:19.236 a little surprised by just how well their case went, 0:52:19.716 --> 0:52:22.156 because there was in the summing up when they were 0:52:22.156 --> 0:52:24.476 making the argument to the jury about why they needed 0:52:24.476 --> 0:52:26.876 to convict they said, even if you believe this guy, 0:52:27.516 --> 0:52:29.836 believe that he just wasn't paying attention to this eight 0:52:29.836 --> 0:52:33.156 billion dollars that he took from the customers and used 0:52:33.156 --> 0:52:36.636 in his private fund. There's this idea called conscious avoidance, 0:52:37.196 --> 0:52:39.156 and that doesn't let you off a hook if you 0:52:39.236 --> 0:52:42.876 just didn't pay attention. But I think Sam, I think 0:52:43.036 --> 0:52:45.516 the simple way to explain all his behavior is his 0:52:45.556 --> 0:52:48.036 animate in his own mind, that he didn't do anything wrong. 0:52:48.436 --> 0:52:53.076 I'm curious to know what you learned, if anything, at 0:52:53.076 --> 0:52:55.596 the trial, but especially I want to know what you 0:52:56.596 --> 0:52:58.556 thought you might learn at the trial, and whether you 0:52:58.596 --> 0:52:59.236 did or didn't. 0:52:59.756 --> 0:53:02.196 There were a couple of things that I really wanted 0:53:02.236 --> 0:53:05.436 to know that in retrospect, maybe the trial wasn't the 0:53:05.436 --> 0:53:06.836 best way to get it. But if he can't get 0:53:06.876 --> 0:53:08.196 at it through the trial, I don't know where you're 0:53:08.196 --> 0:53:10.556 going to get at it through. I really did want 0:53:10.596 --> 0:53:15.756 to know the moment when the sum total of liquid 0:53:15.796 --> 0:53:21.036 assets in Sam's world combination Alameda and FTX was less 0:53:21.116 --> 0:53:24.236 than the customer deposits, Like when did he go negative? 0:53:24.276 --> 0:53:26.156 There is that a knowable fact. 0:53:26.596 --> 0:53:29.756 It could be figured out. The bankruptcy people might know already. 0:53:30.316 --> 0:53:34.796 Wind should have everyone had alarm bells ringing in their heads, 0:53:35.676 --> 0:53:37.876 because I didn't see any sign of alarm bells ringing 0:53:37.916 --> 0:53:40.556 in anybody's head until it blew up. There's another thing. 0:53:41.156 --> 0:53:43.916 When it all fell apart, I was doing this crude 0:53:43.956 --> 0:53:46.956 exercise of figuring out all the money that had come 0:53:46.956 --> 0:53:49.076 into Sam's world and all the money that had left 0:53:49.116 --> 0:53:52.196 it in the form of customer deposits or venture capital 0:53:52.236 --> 0:53:57.276 investments or expenditure on political campaigns. And to this day 0:53:57.316 --> 0:54:00.156 this still seems to me several billion dollars that I 0:54:00.196 --> 0:54:02.836 can't figure out where they went. There's been some hand 0:54:02.876 --> 0:54:06.756 wavy explanations about how it might have been lost. I'm 0:54:06.796 --> 0:54:08.796 not sure it has been lost. It's possible. The bankruptcy 0:54:08.796 --> 0:54:11.716 people still finding literally finding money the way you find 0:54:11.756 --> 0:54:12.676 easter eggs. 0:54:14.916 --> 0:54:18.916 These bankruptcy people are being led by John Ray, who 0:54:18.996 --> 0:54:22.516 was installed as the emergency CEO of FTX by the 0:54:22.596 --> 0:54:26.316 law firm Sullivan and Cromwell. We had Ray on the 0:54:26.316 --> 0:54:29.716 show earlier this year talking about the singular challenge of 0:54:29.796 --> 0:54:34.076 taking over FTX. That was episode five sixty. We called it, 0:54:34.236 --> 0:54:37.996 is this the worst job in Corporate America? Or maybe 0:54:38.116 --> 0:54:42.236 the best. Here's what Michael Lewis wrote about John Ray 0:54:42.436 --> 0:54:45.356 and the process by which he came to replace Sam 0:54:45.396 --> 0:54:47.116 Bankman Freed as CEO. 0:54:50.396 --> 0:54:53.276 The Wild and wonderful world of US corporate bankruptcy was 0:54:53.316 --> 0:54:56.356 increasingly dominated by big law firms, but there were still 0:54:56.396 --> 0:54:59.196 a few of these lone actors like Ray, who played 0:54:59.196 --> 0:55:02.196 the role of wildcatters. The law firms brought in the 0:55:02.196 --> 0:55:05.116 wildcatter to take over as CEO of the failed firm, 0:55:05.716 --> 0:55:09.356 and the wildcatter in turn hired the law firms as 0:55:09.356 --> 0:55:11.636 a legal matter. At four point thirty in the morning 0:55:11.636 --> 0:55:15.556 on Friday, November eleventh, twenty twenty two, Sam Bank and 0:55:15.596 --> 0:55:20.116 freed Docu signed FTX into bankruptcy and named John Ray 0:55:20.156 --> 0:55:24.516 as ftx's new CEO. As a practical matter, Sullivan and 0:55:24.596 --> 0:55:26.956 Cromwell lined up John Ray to replace Sam as the 0:55:26.996 --> 0:55:31.236 CEO of FTX, and then John Ray hired Sullivan Cromwell 0:55:31.356 --> 0:55:35.796 as the lawyers for the massive bankruptcy. I mean, the 0:55:35.836 --> 0:55:38.916 problem with the bankruptcy process is that it's designed to 0:55:38.956 --> 0:55:41.516 maximize the number of billable hours. It's designed to go 0:55:41.556 --> 0:55:43.476 on forever and ever and ever, and it's going to 0:55:43.516 --> 0:55:45.196 cost a billion dollars. It's crazy. 0:55:45.716 --> 0:55:48.276 Is that more on Ray or more in Solivon Cromwell 0:55:48.356 --> 0:55:49.676 or just the way the system works. 0:55:50.076 --> 0:55:51.916 The way the system works, the system's nuts. 0:55:52.356 --> 0:55:53.916 What would you propose instead. 0:55:54.316 --> 0:55:56.196 I think that needs to be a regulator. At the moment, 0:55:56.236 --> 0:55:59.356 there's no oversight. They is someone call the bankruptcy trustee, 0:55:59.356 --> 0:56:01.716 who's an employee of the Department of Justice, who has 0:56:01.756 --> 0:56:04.596 no teeth, his ability to write angry letters to the judge, 0:56:04.636 --> 0:56:07.956 and he has saying it's outrageous how this is being run. 0:56:08.116 --> 0:56:09.556 But the judge can just ignore it. 0:56:10.076 --> 0:56:12.316 Now that you've seen the trial, if you had to 0:56:12.316 --> 0:56:14.276 write the book over again, what would you do different? 0:56:14.716 --> 0:56:16.476 The one thing I would have loved to have known. 0:56:17.156 --> 0:56:20.476 I love the idea in their pillow talk of Sam 0:56:20.596 --> 0:56:22.876 saying to Caroline that there was a five percent chance 0:56:22.916 --> 0:56:25.516 he would be president of the United States. I feel 0:56:25.556 --> 0:56:27.636 like I was robbed of material. 0:56:28.276 --> 0:56:31.276 One more reason I'm just thinking now about why the 0:56:31.316 --> 0:56:35.316 book got a different reception than one might have anticipated 0:56:35.916 --> 0:56:37.796 is because it came out around the same time as 0:56:37.836 --> 0:56:42.436 Walter Isaacson's bio of Elon Musk, and Walter gets to 0:56:42.476 --> 0:56:45.476 spend a lot of time with his subjects, also living subjects. 0:56:45.476 --> 0:56:48.556 At least. I haven't read Walter's book, but my read 0:56:48.596 --> 0:56:53.516 of the reviews is that he praises Musk's accomplishments while 0:56:53.796 --> 0:56:56.596 laying out the ways in which personally he's kind of 0:56:56.596 --> 0:56:59.796 an asshole, and Musk is still the richest guy in 0:56:59.836 --> 0:57:02.076 the world and at the top of his game. Sam 0:57:02.156 --> 0:57:05.356 had been defenestrated by the time the book came out, 0:57:05.716 --> 0:57:08.076 And I wonder if maybe I don't know, it's the 0:57:08.156 --> 0:57:10.676 right kind of target for the right kind of times, 0:57:10.716 --> 0:57:12.916 and you didn't shoot an arrow through that target. 0:57:13.276 --> 0:57:16.236 Well, I can't write it any other way than it was. 0:57:16.476 --> 0:57:19.076 It would have been bizarre to try to pretend that 0:57:19.156 --> 0:57:22.956 Sam Bangertfried was obviously evil to everybody around him. It 0:57:22.996 --> 0:57:26.236 would have failed to grapple with why all these people 0:57:26.916 --> 0:57:32.716 got the smartest fetcher. Capitalists, important politicians, celebrities are enthralled 0:57:32.716 --> 0:57:37.196 by him. How stupid would it be not to create 0:57:37.356 --> 0:57:41.596 some of the charm that led him finding himself in 0:57:41.636 --> 0:57:42.596 the position he was in. 0:57:45.556 --> 0:57:50.196 There is a particularly revealing scene, particularly sad scene, toward 0:57:50.276 --> 0:57:55.076 the end of Lewis's book. This happens after FTX had cratered, 0:57:55.196 --> 0:57:59.196 but before bankman Freed had been arrested, and even though 0:57:59.236 --> 0:58:02.756 most of his employees had fled the Bahamas, he stayed on, 0:58:03.596 --> 0:58:08.116 and so did Constance Wang, the chief operating officer of FTX. 0:58:08.276 --> 0:58:11.956 She had been bankman and Freed's eighth higher Michael Lewis 0:58:12.036 --> 0:58:15.996 was also in the Bahamas. Then here's what he writes. 0:58:18.036 --> 0:58:20.156 For the better part of the month, I watched Constance 0:58:20.196 --> 0:58:23.916 return from her encounters with Sam. Over and over. She 0:58:24.036 --> 0:58:27.076 confronted Sam with the suffering he'd inflicted upon the very 0:58:27.116 --> 0:58:30.636 people who'd been the most loyal to him. Most FTX 0:58:30.636 --> 0:58:34.836 employees had lost their life savings. Some had lost their spouses, 0:58:34.876 --> 0:58:38.236 their homes, their friends, and their good names. There were 0:58:38.236 --> 0:58:42.196 Taiwanese employees of FTX still in Hong Kong who couldn't 0:58:42.196 --> 0:58:47.396 afford plane tickets home. I asked, Sam said, Constance, when 0:58:47.436 --> 0:58:50.116 you were doing this, have you ever thought how much 0:58:50.196 --> 0:58:53.636 this event will be hurting people? Even here? However, she 0:58:53.676 --> 0:58:57.076 found herself talking past Sam. In his telling he hadn't 0:58:57.076 --> 0:59:00.236 realized how much risk he'd subjected others to without their permission. 0:59:01.196 --> 0:59:04.356 Constance nevertheless sense that he didn't really register the damage 0:59:04.396 --> 0:59:06.996 he'd caused to other people in the way that say 0:59:07.116 --> 0:59:12.556 she might have as absolutely zero empathy. She said, that's 0:59:12.596 --> 0:59:16.076 what I learned that I didn't know he can't feel anything. 0:59:19.316 --> 0:59:20.916 So did Sam read your book? 0:59:21.316 --> 0:59:24.676 I've not spoken to him since he was hauled off 0:59:24.676 --> 0:59:28.196 to jail on August the eleventh. I was told by 0:59:28.236 --> 0:59:31.356 his lawyers that they snuck it into him on a 0:59:31.596 --> 0:59:34.316 drive that had all of the legal documents. But I 0:59:34.356 --> 0:59:36.076 don't know what he thought about it. He's the one 0:59:36.076 --> 0:59:38.596 person who hasn't ventured an opinion about my book. 0:59:41.196 --> 0:59:46.396 What's your opinion? Our email is radio at freakonomics dot com. 0:59:46.636 --> 0:59:49.516 The book is called Going Infinite, The Rise and Fall 0:59:49.556 --> 0:59:53.276 of a New Tycoon by Michael Lewis. Freakonomics Radio is 0:59:53.276 --> 0:59:56.476 produced by Stitcher and ren Bud Radio. This episode was 0:59:56.476 --> 1:00:00.356 produced by Ryan Kelly. The excerpts you heard from Going 1:00:00.396 --> 1:00:03.076 Infinite were read by the author, Michael Lewis, from an 1:00:03.116 --> 1:00:08.116 audiobook produced by Audible Studios. Our staff also includes Elina Cullman, Eleanor, 1:00:08.156 --> 1:00:13.036 Osborne Else, Hernandez Gabriel Roth, Greg Rippon, Jasmin Klinger, Jeremy Johnston, 1:00:13.116 --> 1:00:17.356 Julie canfer Lyrick Boutitch, Morgan Levy, Neil Caruth, Rebecca Lee Douglas, 1:00:17.396 --> 1:00:20.716 Sarah Lily, and Zach Klapinski. Our theme song is Mister 1:00:20.796 --> 1:00:23.356 Fortune by The Hitchhikers. The rest of the music in 1:00:23.396 --> 1:00:26.716 this episode was composed by Luis Gera Michael Riola, and 1:00:26.756 --> 1:00:30.596 Stephen Ulrich. You can find our entire archive on any 1:00:30.636 --> 1:00:33.596 podcast app or at freakonomics dot com, where we also 1:00:33.636 --> 1:00:37.876 publish transcripts and show notes. As always, thanks for listening. 1:00:42.116 --> 1:00:44.516 I have approximately a million more questions, but it is 1:00:44.636 --> 1:00:47.196 one o'clock. You gotta go, I assume, yeah, yeah, I 1:00:47.236 --> 1:00:50.796 do have to go. All right, this was fun, my hope, 1:00:50.796 --> 1:00:51.316 it was fun. 1:00:56.076 --> 1:01:04.116 The Freakonomics Radio Network, The Hidden Side of Everything, Stitcher,