Speaker 1: Pushkin.
Speaker 2: Hey, there against the Rules listeners. I am Stephen Dubner
Speaker 2: and I host Freakonomics Radio, the podcast that explores the
Speaker 2: hidden side of everything. A few months ago, I sat
Speaker 2: down with Michael Lewis to talk about his latest book,
Speaker 2: Going Infinite, The Rise and Fall of a New Tycoon.
Speaker 2: We talked about the story that's in the book, Sam Bankman, Freed,
Speaker 2: and FTX, as well as people's reactions to the book.
Speaker 2: Our episode is called why Are People So Mad At
Speaker 2: Michael Lewis, So we wanted to share this episode with you.
Speaker 2: Thanks for listening. I feel like, as much as Sam
Speaker 2: Bankman Freed has been in the center of a vortex,
Speaker 2: that you're close to the senders. Oh can you just
Speaker 2: tell me what your life has been like the past
Speaker 2: couple months?
Speaker 1: Surprisingly controversial, This material just landed in my lap, and
Speaker 1: I really did think when I was writing it, I
Speaker 1: never had more fun writing a book than I had
Speaker 1: writing this one. I knew that some people were going
Speaker 1: to be a little bit upset with the book, but
Speaker 1: I thought basically it was going to be taken as
Speaker 1: a thrill ride and it would just be a fun
Speaker 1: read for everybody. What I wasn't prepared for was just
Speaker 1: the sheer volume of the anger.
Speaker 2: Michael Lewis is one of the most popular nonfiction authors
Speaker 2: on the planet. His books include Liar's Poker, Moneyball, The
Speaker 2: Big Short, Flash Boys, and Now Going Infinite. The Rise
Speaker 2: and Fall of a New Tycoon. The tycoon in question
Speaker 2: is Sam Bankman Freed, who was briefly everyone's favorite cryptocurrency billionaire,
Speaker 2: and Michael Lewis rode shotgun for some of the rise
Speaker 2: and most of the fall. The fall was fast and hard.
Speaker 2: Was recently convicted of seven counts of fraud and conspiracy
Speaker 2: in a New York courtroom. The controversy comes from people
Speaker 2: who argue that Michael Lewis went soft on Bankman Freed
Speaker 2: instead of lasting him as a crook and a cheat.
Speaker 2: Here is how a New York Times review put it.
Speaker 2: Lewis had, in the months leading up to the disaster,
Speaker 2: a front row seat from which he could apparently see nothing.
Speaker 1: It troubles me that people want to put Sam Bankman
Speaker 1: Freed into a simple box and put him on a
Speaker 1: shelf and not think too much more about this.
Speaker 2: Why it troubles you?
Speaker 1: Why Because he's so much more and this is so
Speaker 1: much more interesting than that.
Speaker 2: Today on Freakonomics Radio. Interesting is just the start of it.
Speaker 2: Sam Bankman Freed bared all to Michael Lewis, and now
Speaker 2: Michael Lewis bears all for us.
Speaker 1: It was an unguarded ness. They was shocking.
Speaker 2: It's the latest installment of the Freakonomics Radio book Club
Speaker 2: and begins right now.
Speaker 3: This is Freakonomics Radio, the podcast that explores the hidden
Speaker 3: side of everything, with your host Stephen Dubner.
Speaker 2: Here's how Michael Lewis begins his new book, Going Infinite.
Speaker 2: This is from the audio version, with Lewis himself reading.
Speaker 1: I first heard about Sam Bankman Freed at the end
Speaker 1: of twenty twenty one from a friend who oddly enough
Speaker 1: wanted me to help him figure out who he was.
Speaker 1: My friend was about to close a deal with Sam
Speaker 1: that would bind their fates through an exchange of shares
Speaker 1: in each other's companies worth hundreds of millions of dollars.
Speaker 1: My friend asked me if I could meet with Sam
Speaker 1: and report back whatever I made of him. A few
Speaker 1: weeks Sam was on my front porch in Berkeley, California.
Speaker 1: He'd emerged from an uber in cargo shorts, a T
Speaker 1: shirt limp white socks and ratty new Balance sneakers, which
Speaker 1: I soon learned were basically the only clothes he owned.
Speaker 1: We went for a walk, the only time in the
Speaker 1: next two years I would ever see this person who
Speaker 1: was always dressed for a hike actually go for one.
Speaker 1: During our walk, I prodded him with questions, but after
Speaker 1: a while I was mostly just listening. The stuff he
Speaker 1: was telling me, all of which I should say here
Speaker 1: turned out to be true, was incredible. By the end
Speaker 1: of this walk, I was totally sold. I called my
Speaker 1: friend and said something like, go for it, swap shares
Speaker 1: with Sam Bankman Freed, do whatever he wants to do.
Speaker 1: What could possibly go wrong?
Speaker 2: As we now know, a lot of things went wrong.
Speaker 2: Bankman Freed started and ran two firms, a cryptocurrency trading
Speaker 2: firm called Alameter Research and a crypto exchange based in
Speaker 2: the Bahamas called FTX. When FTX collapsed in twenty twenty two,
Speaker 2: Bankman Freed was charged with shuffling money between the two
Speaker 2: firms and spending billions of dollars of customers deposits on
Speaker 2: political contributions, celebrity marketing, and venture capital investments. He also
Speaker 2: directed a lot of money toward the effective altruism movement.
Speaker 2: The thing is, as you read Michael Lewis's book, it's
Speaker 2: hard to separate Bankman Freed's illegal behaviors from the ones
Speaker 2: that were just sloppy or weird. The book's publication was
Speaker 2: timed to coincide with the first day of the Bankman
Speaker 2: Freed trial, so heading into the trial, a lot of
Speaker 2: people were asking Lewis what he thought.
Speaker 1: I didn't actually say I don't think he did anything illegal,
Speaker 1: or I'm not sure what I said was I don't
Speaker 1: want to say, because I wanted to just tell the
Speaker 1: story and let the reader decide what they think. The
Speaker 1: book is filled with stuff that is essentially lawbreaking, but
Speaker 1: I'm just telling it rather than telling you he broke
Speaker 1: the law.
Speaker 2: So do you think maybe that's why you've been somewhat
Speaker 2: punished because you didn't act as judge and jury in
Speaker 2: the book.
Speaker 1: Yes, totally. But what I did, and I did very intentionally,
Speaker 1: was I let the characters in the book investigate him
Speaker 1: rather than me. I mean it was made to order
Speaker 1: for narrative nonfiction. I had the chief operating officer of
Speaker 1: the company, who'd been from the beginning, who realizes when
Speaker 1: it all blows up. She doesn't know how this company operated,
Speaker 1: and she wants to lynch him like she's helping the prosecutor.
Speaker 1: She's trying to find evidence. So I just let her
Speaker 1: do it.
Speaker 2: So your books are generally very well reviewed among writers.
Speaker 2: You're thought of as a writer's writer, so I'm not
Speaker 2: used to seeing you get this kind of attention. Bad reviews,
Speaker 2: features that call you into question. I'll read you a
Speaker 2: couple of headlines from the Washington Post. Michael Lewis goes
Speaker 2: close on Sam Bankman Freed, maybe too close. La Times.
Speaker 2: What you won't learn from Michael Lewis's book on the
Speaker 2: ft could fill another book another La Times piece in
Speaker 2: Michael Lewis, Sam Bankman Fried found his last and most
Speaker 2: willing victim. So the through line here is that critics
Speaker 2: feel you still treat him too much like a hero
Speaker 2: and at least like someone to be sympathized with.
Speaker 1: Well, can I push back on this first? They are
Speaker 1: also reviews by better writers in The New Yorker, in
Speaker 1: the London Review of Books, in The Times Literary Supplement
Speaker 1: that are very positive. There was no consensus in the reviews,
Speaker 1: but the objections here were bewildering to me because the
Speaker 1: idea that you're not supposed to get to know your subject.
Speaker 1: I mean, there are people who have been presenting themselves
Speaker 1: as authorities on Sam Bankman Freed, who's never met him.
Speaker 1: It's really useful to get to know someone if you're
Speaker 1: going to write about them. The idea that I was
Speaker 1: somehow blinded to what he had done is preposterous. Because
Speaker 1: I didn't start writing this thing until January.
Speaker 2: Of the year.
Speaker 1: You could see what it does. I think that people
Speaker 1: are confusing painting him as he actually is was sympathizing
Speaker 1: with him. Is it surprising that if you paint him
Speaker 1: as he actually is you feel yourself disturbingly drawn to him?
Speaker 1: Because this was the problem in the first place. This
Speaker 1: is what led to the whole problem. If you don't
Speaker 1: feel some attraction him, at least in the beginning of
Speaker 1: the book, you're completely missing why this happened in the
Speaker 1: first place. So to start out as, oh, this guy's
Speaker 1: evil and everybody saw it and I saw it first,
Speaker 1: it's false. Second, you miss the wonder of the story.
Speaker 2: The story really begins in twenty seventeen, when Bankman Freed
Speaker 2: quit his job at the trading firm Jane Street Capital
Speaker 2: to start his own crypto trading firm, Alameda Research. As
Speaker 2: Lewis's book makes clear, Alameda was from the beginning a mess.
Speaker 2: Bankman Freed was very good at finding clever ways to
Speaker 2: make money by trading cryptocurrencies at a time when most
Speaker 2: mainstream trading firm still avoided crypto. But as a CEO
Speaker 2: he was terrible, unfocused, unreliable, and totally uninterested in any
Speaker 2: of the normal processes required to run a company or
Speaker 2: to manage employees.
Speaker 1: And after about three months, half of them hated Sam
Speaker 1: and half of them thought he was a criminal.
Speaker 2: Then he created the cryptocurrency trading platform FTX and became
Speaker 2: CEO of it. He timed the crypto wave perfectly. By
Speaker 2: twenty twenty one, Forbes put Sam Bankminfried's wealth at twenty
Speaker 2: two and a half billion dollars, making him the world's
Speaker 2: richest person under thirty At FTX, he was still a
Speaker 2: bad CEO, but there was more to it than that.
Speaker 1: What he did is he misappropriated funds. He told people
Speaker 1: that their money was safe in one place, and he
Speaker 1: was actually he was taking big gambles with it in
Speaker 1: another place. What's odd about these gambles is that some
Speaker 1: of them seemed to have worked out pretty well. Look,
Speaker 1: I'm not a lawyer, and I was never all that
Speaker 1: interested in the legal questions. I was more interested in
Speaker 1: the moral questions. And he clearly, in my story, right
Speaker 1: from the beginning, did something that was illegal. He didn't
Speaker 1: ever separate the funds like he had his hedge fund,
Speaker 1: alometor research or quant fund or whatever you want to
Speaker 1: call it, and his exchange. And the way people got
Speaker 1: their dollars onto the exchange was by sending it to
Speaker 1: his quand fund, and it never left the Quand fund.
Speaker 1: So he was essentially extending himself a free loan, using
Speaker 1: customer to posits.
Speaker 2: Right from the beginning, when you started hanging out with Sam,
Speaker 2: he was already well known in some circles, maybe not
Speaker 2: famous quite. And then your relationship extended, including to the
Speaker 2: collapse of FTX, up to the trial and so on.
Speaker 2: First of all, I want to hear about how the
Speaker 2: reporting happened. I mean, we know a lot about you
Speaker 2: as a reporter. You really believe in the old school
Speaker 2: idea of just hanging out with a notebook. So I
Speaker 2: want to hear about the relationship how it worked, and
Speaker 2: especially how the relationship changed between you and him after
Speaker 2: the collapse.
Speaker 1: I didn't start out thinking I had a book or
Speaker 1: what the book was. I start out thinking, this character
Speaker 1: is really interesting and the situation's bizarre. He's gone from
Speaker 1: zero to having twenty two billion dollars in eighteen months,
Speaker 1: and the world is organizing itself around this pile of money.
Speaker 1: I just want to watch. So that's how it starts.
Speaker 1: I say to him, I just want to watch. I
Speaker 1: don't know what there is here, and he says, fine,
Speaker 1: come on down to Bahamas and here are the keys.
Speaker 1: And so I spend a year doing that. At no
Speaker 1: point did Sam becinfree ask me what I was doing.
Speaker 1: At no point did he say I can't answer that question,
Speaker 1: or why are you asking that question. It was an unguardedness.
Speaker 1: They were shocking, and it wasn't just with me. I
Speaker 1: think other reporters found that when they pushed a little bit,
Speaker 1: doors just opened. There.
Speaker 2: Some of the scenes in the book aren't just comically bizarre,
Speaker 2: like when he's on a zoom call with Anna wind
Speaker 2: Tour from Vogue magazine, who wants him to participate in
Speaker 2: maybe fund the mech Gala the very high profile fashion
Speaker 2: event at the Metropolitan Museum of Art in New York, YEP.
Speaker 2: In that instance, where are you Are you in the
Speaker 2: room with him when he's on that call?
Speaker 1: Yes?
Speaker 2: Where is that?
Speaker 1: It's in the Beverly Hills Hilton Hotel.
Speaker 2: And he's in La.
Speaker 1: Why he's in La because he's gone to the super Bowl.
Speaker 1: It was the day he was leaving to go back
Speaker 1: to the Bahamas, and I was going to join him.
Speaker 1: He says, I got a call. And I said who
Speaker 1: you got a call with? He says, I don't know.
Speaker 1: Anna went tour And I said, oh really, And so
Speaker 1: I sat off to one side and it was just
Speaker 1: there was no one else in the room, just him
Speaker 1: and I watched and I scribbled furiously notes as he spoke,
Speaker 1: and realized in the moment that I was watching a
Speaker 1: microcosm of Sam Bankmanfree's relationship with the outside world, especially
Speaker 1: the outside world that organized hisself around piles of money.
Speaker 2: And how would you describe that relationship.
Speaker 1: Sycophanic towards him? There was a certain obliviousness on his
Speaker 1: part to who these people were and why they wanted
Speaker 1: what they wanted. He knew they wanted money, but beyond that,
Speaker 1: he didn't pay that close attention to who they were.
Speaker 1: He's trying to figure out just how much attention he
Speaker 1: should pay to these people because they were constant. It
Speaker 1: was like brunch with Shack and dinner with the head
Speaker 1: of Gold and Sacks. A lot of this was completely
Speaker 1: new to him.
Speaker 2: So on this Anna Winter call, he agrees to what
Speaker 2: she's asking for, to maybe sponsor attend something the met gala,
Speaker 2: but then in the end he cancels on her at
Speaker 2: the last minute.
Speaker 1: Much more complicated than that, because he seems to agree
Speaker 1: to everything she says, everything because he's actually not really listening.
Speaker 1: He's playing a video game when he's talking to her.
Speaker 1: He just turns her picture off when she's talking and
Speaker 1: plays the video game. And only when he hears like,
Speaker 1: oh Sam, what do you think of that? Does he
Speaker 1: wake up, turn her picture back on, stall get the
Speaker 1: question again and answer it. She would have understandably left
Speaker 1: that conversation thinking that he was all in on the
Speaker 1: met Gala, that he was going to go, maybe even
Speaker 1: pay for it, But he hasn't actually said very much
Speaker 1: except yep. And then when he's done, I ask him, like, really,
Speaker 1: you're sitting here in your shorts and your cargo shorts
Speaker 1: and your T shirt and your limp socks. You have
Speaker 1: no interest in fashion. You don't even know who she is, Like,
Speaker 1: you're really going to go to that? And he goes,
Speaker 1: I never really thought about it. You know, by the
Speaker 1: time I met him, he had figured out that the
Speaker 1: best way to navigate the world of the rich and
Speaker 1: famous was just to agree with everything they said. He
Speaker 1: actually says this. He says, I've discovered it's like an
Speaker 1: AI program, I discover people like you if you agree
Speaker 1: with him, what would.
Speaker 2: You say that Sam Bankman Freed is or was exceptionally
Speaker 2: good at and exceptionally bad at.
Speaker 1: He was exceptionally bad at understanding how people would feel
Speaker 1: about his behavior, Like even now I think he doesn't
Speaker 1: understand why people are so angry. When he moves from childhood,
Speaker 1: which his child is completely isolated, it has no real
Speaker 1: relationships with anybody, into adulthood and he starts to figure
Speaker 1: out he wants to have relationships with people. He learns
Speaker 1: how to kind of fake emotional his emotions and kind
Speaker 1: of signaling his inner life so that people aren't so
Speaker 1: freaked out by him. There's a sort of absence in
Speaker 1: his imagination of what other people are feeling. What was
Speaker 1: he exceptionally good at. He was interesting in his attempts
Speaker 1: to quantify the unquantifiable. To me, what made him when
Speaker 1: I first met him, such an interesting character was the
Speaker 1: way he was moving through the world was so weird.
Speaker 1: He was essentially moneyballing life. Everything was an expected value calculation,
Speaker 1: and in some ways you can think of him as
Speaker 1: having replaced principles with probabilities. There were no fixed rules.
Speaker 1: Everything was We're going to try to measure the expected
Speaker 1: value of this decision or that decision and do the
Speaker 1: thing that's the highest expected value, and doing things like
Speaker 1: making decisions about whether to get married and have children
Speaker 1: this way.
Speaker 2: Sam Bankman Freed grew up in California. Both his parents
Speaker 2: were legal scholars at Stanford. Sam went to college at MIT,
Speaker 2: where he studied physics and math. It was during college
Speaker 2: that he met a young philosophy professor from Oxford named
Speaker 2: Will mccaskell, who made him think about his life differently.
Speaker 2: Here is a passage from going Infinite.
Speaker 1: The argument that mcaskell put to Sam and a small
Speaker 1: group of Harvard students in the fall of twenty twelve,
Speaker 1: went roughly as follows, you student at an elite university
Speaker 1: will spend roughly eighty thousand hours of your life working.
Speaker 1: If you're the sort of person who wants to do
Speaker 1: good in the world, what is the most effective way
Speaker 1: to spend those hours? Put bluntly, should you do good
Speaker 1: or make money and pay other people to do good?
Speaker 1: Was it better to become a doctor or a banker.
Speaker 1: Mccaskell made a rough calculation of the number of lives
Speaker 1: saved by a doctor working in a poor country where
Speaker 1: lives were cheapest to save. Then he posed a question,
Speaker 1: what if I become an altruistic banker pursuing a lucrative
Speaker 1: career in order to donate my earnings. Even a mediocre
Speaker 1: investment banker could expect sufficient lifetime earnings to pay for
Speaker 1: several doctors in Africa, and thus would save several times
Speaker 1: more lives than any one doctor.
Speaker 2: Mccaskell and his associates called their movement effective altruism. My
Speaker 2: Freakonomics friend and co author Steve Levitt interviewed mccaskell on
Speaker 2: his podcast People I Mostly Admire in August of last year.
Speaker 2: This was just a couple months before Sam Bankman freed
Speaker 2: was arrested. Here is a piece of that interview with
Speaker 2: mccaskell talking about the earning to Give model.
Speaker 4: The biggest success story for learning to give is Sam
Speaker 4: Bankman Freeds, who's now the relitious person in the world
Speaker 4: under the age of thirty five, and he's publicly stated
Speaker 4: he's giving away ninety nine percent of his wealth or more.
Speaker 4: And as all ready i'mping up is giving. I think
Speaker 4: part of what helps here is that we've just built
Speaker 4: this community. It's much easier to live up to your
Speaker 4: ideals if you've got a bunch of people around you
Speaker 4: who will please you for living up to them. And
Speaker 4: maybe you'll feel shunned or less welcome if you're claiming
Speaker 4: that you want to do enormous amounts of good and
Speaker 4: give enormous amounts but actually aren't.
Speaker 2: When Bankman Freed heard mccaskell's pitch back in twenty twelve,
Speaker 2: he was sold. He ultimately decided to make as much
Speaker 2: money as possible. His personal goal was infinity dollars, thus
Speaker 2: the title of Michael Lewis's book, and that's why after
Speaker 2: he graduated from MIT, he took a job in New
Speaker 2: York doing high frequency trading at Jane Street Capital.
Speaker 1: The people on Wall Street who hired him would have
Speaker 1: told you and that he was extremely good when you
Speaker 1: gave him games to play that required these expected value calculations.
Speaker 1: He was a wizard that he was really really good
Speaker 1: at dealing with sort of messy, semi chaotic environments and
Speaker 1: making the smart decisions in them. Here's an example. If
Speaker 1: you asked him to sit down and play chess with
Speaker 1: a grand master, he would have been okay, but not great.
Speaker 1: But if you change the game it was speed chess,
Speaker 1: and you had five seconds to make a move, and
Speaker 1: every minute you change the rules of the game so
Speaker 1: that all of a sudden the bishops have to be
Speaker 1: pawns and the pawns have to be bishops. He might
Speaker 1: have beaten the grand master in that kind of environment
Speaker 1: where it's almost impossible to know what the right answer is,
Speaker 1: but you can make some quick judgments and act on them.
Speaker 1: He was especially good.
Speaker 2: When you say he replaced principles with probabilities. It strikes
Speaker 2: me that that's a good way of describing the fear
Speaker 2: that's going on right now of what AI is going
Speaker 2: to do.
Speaker 1: That's funny you say this When I was thinking about
Speaker 1: what this story was a parable for when I was
Speaker 1: writing it, one of the things that kept popping in
Speaker 1: my head was a parable for AI. It was like
Speaker 1: a foreshadowing of what happened when you let an artificial
Speaker 1: intelligence loosen the world with a goal, telling it what
Speaker 1: to do, but not telling it how to do it right.
Speaker 1: So you tell it to get a reservation at your
Speaker 1: favorite restaurant tomorrow night, and it go out and finds
Speaker 1: that the restaurants fully booked and starts to kill the
Speaker 1: people who have reservations to get you a table. That's
Speaker 1: Sam Bagmunfreed. That's Sam Bagman Freed. He's programmed him sell
Speaker 1: himself to make as much money as possible to then
Speaker 1: spend to to defray existential risk to humanity without any
Speaker 1: instructions about what he can't do in order to do that.
Speaker 1: I felt, at any given moment when he's making his decisions,
Speaker 1: he was always on pretty shaky ground in his calculations, Like,
Speaker 1: I don't know what the probability of AI wiping us
Speaker 1: all out, or some pandemic wiping us all out, or
Speaker 1: an asteroid hitting the earth, but neither is he And
Speaker 1: yet he's putting very confidently numbers on these things and
Speaker 1: acting on these numbers.
Speaker 2: Many of the people Bankman Freed recruited to work at
Speaker 2: Alameda and FTX also considered themselves effective altruists or eas
Speaker 2: and they talked about the expected value of their actions
Speaker 2: the same way he did.
Speaker 1: It was quirky, and it was weird watching people think
Speaker 1: they could be precise about things that you just couldn't know.
Speaker 1: But I actually quite liked the fact that there were
Speaker 1: people who were worrying about these things. And to their credit,
Speaker 1: right the effective altruists get to the fear of AI
Speaker 1: before all of us. They weren't all wrong. They aren't
Speaker 1: all wrong. My god, we may look back and say
Speaker 1: they were all right.
Speaker 2: I'm curious what impressions you walked away with of the
Speaker 2: effective altruist crowd, especially Will mccaskell, the ringleader. I'm curious
Speaker 2: whether you think he and the core movement are sincere.
Speaker 2: Are they a little bit grifty? Are they both?
Speaker 1: I think they're completely sincere. But on the other hand,
Speaker 1: the best con men believe their own con but I
Speaker 1: don't think of them as con men at all. They're academics.
Speaker 1: There's a kind of blinder quality to them. The whole movement.
Speaker 1: It has this cult like quality in that it attracts
Speaker 1: a certain kind of person and then they get their
Speaker 1: meaning of life from the thing. But it's a kind
Speaker 1: of anti cult cult in that unlike most cults, well
Speaker 1: what is it's a cult? Reason right, It's a cult
Speaker 1: where if you have a better argument inside the cult,
Speaker 1: you win and the cult changes. So it's a little
Speaker 1: different from most cults. And it has had this capacity
Speaker 1: to kind of phase change in a way that cults
Speaker 1: normally don't. They start up trying to save you poor
Speaker 1: children in Africa, and they end up worrying about human
Speaker 1: beings the trillion years from now living on Mars. I
Speaker 1: think of them as completely sincere, generally pretty sweet natured,
Speaker 1: devoted to logic and reason and argument, and somehow it
Speaker 1: has the capacity still to run off the rails.
Speaker 2: Did they respect Sam or did they just love him
Speaker 2: for his money?
Speaker 1: I think they felt about Sam the way Sam's parents
Speaker 1: felt about Sam. They were scared both for and of him,
Speaker 1: and they were interestingly, even in good times, a little
Speaker 1: worried about him being too closely identified with the movement,
Speaker 1: because he became kind of the face of the movement.
Speaker 1: I think they smelled the existential risk to the movement.
Speaker 1: He became too important to them.
Speaker 2: How bad has his downfall been for them?
Speaker 1: I don't know how. With the recruiting numbers in the
Speaker 1: Stanford and Princeton and Harvard and MIT math and physics
Speaker 1: departments are looking like these days can have been good?
Speaker 1: Can have been good? My guess is it causes a
Speaker 1: bit of a retrenchment in how they think about what
Speaker 1: they're doing. I think that back in the day, when
Speaker 1: it was just being more intellectually rigorous about what you
Speaker 1: did with charitable dollars, it was pretty unobjectionable. Where I
Speaker 1: find the whole thing jumps the shark is the earn
Speaker 1: to give idea. I'm not quite sure why I feel
Speaker 1: this way, but the whole idea that to stop trying
Speaker 1: to do good yourself and maximize the dollars you make
Speaker 1: and pay someone else to do good with them. There's
Speaker 1: something about divorcing charitable acts from human sympathy that feels
Speaker 1: a little weird to me.
Speaker 2: There's this concept. I think it's mostly in psychology, but
Speaker 2: others use it called moral licensing. It's this idea that
Speaker 2: if you're doing something great for people or the world,
Speaker 2: in one corner of your life, you give yourself licensed
Speaker 2: to lie or cheat or steal whatever. In another corner.
Speaker 2: Do you think that he felt that because he's making
Speaker 2: money in the service of effective altruism, which is going
Speaker 2: to use money to solve potentially existential problems, that that
Speaker 2: just trumped everything else, And that if he needed to
Speaker 2: be deceitful or withhold information, etc. That he's still kind
Speaker 2: of in the plus column because of the big one.
Speaker 1: Yes, I think so he wouldn't put it that way.
Speaker 1: I'm trying to think how he would put it, but
Speaker 1: the effect is the same. This is the whole business
Speaker 1: of replacing principles with probabilities. There are no firm, fixed
Speaker 1: rules that he will obey. So why does he allow
Speaker 1: himself to move through the world without obeying firm fixed rules.
Speaker 1: It's because he thinks this larger goal justifies it. He
Speaker 1: figures out as a kid or as pretty young person,
Speaker 1: that he has the ability to do harm because he
Speaker 1: doesn't feel what other people feel. It's a bit like
Speaker 1: if you didn't feel pain, you're more likely like put
Speaker 1: your hand on the stove and burn it off. He's
Speaker 1: lacking some essential human equipment that would constrain.
Speaker 2: His behavior, and he knows it.
Speaker 1: And he knows it, and so when he discovers a rule,
Speaker 1: he can give himself our goal he can give himself,
Speaker 1: and the goal seems noble, lower the existential risk to humanity,
Speaker 1: save human lives. In a way, He's trying to put
Speaker 1: some constraint on the harms he creates. But I do
Speaker 1: think moral licensing will do as an explanation.
Speaker 2: I'm curious to know what the effective altruists make of
Speaker 2: someone like Bill Gates. He's spent the past ten fifteen
Speaker 2: years spending billions of dollars trying to do what looks
Speaker 2: to me like a version of what they want to do,
Speaker 2: and there have been people throughout history trying to do
Speaker 2: similar things. What do you see as the biggest distinction
Speaker 2: between Gates and the effective altruists.
Speaker 1: Degree of fanaticism and rigor. I mean, I think Gates
Speaker 1: does a lot of things other than just try to
Speaker 1: maximize the lives saved with his dollars. But I think
Speaker 1: the eas would tell you that Gates is the closest
Speaker 1: thing to an EA who's not an EA. They're probably
Speaker 1: dollars that Bill Gates have given to museums that would
Speaker 1: disturb them because they're a dollar given to a museum
Speaker 1: is a dollar wasted in their minds.
Speaker 2: Coming up after the break, another way to waste dollars.
Speaker 1: If you give Donald Trump five billion dollars not to
Speaker 1: run for president, what do you think he's going to do?
Speaker 2: I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back.
Speaker 2: Sam Bankman Free didn't buy a yacht or have expensive
Speaker 2: tastes on most of the normal dimensions, but he did
Speaker 2: spend a lot of money in the political arena. Some
Speaker 2: of this went toward influencing cryptocurrency regulation in the US,
Speaker 2: which would have let his FTX Exchange expand its business,
Speaker 2: but his political spending went in other directions too. Here
Speaker 2: again is Michael Lewis, author of Going Infinite.
Speaker 1: So he spends ten million dollars in an Oregon Democratic
Speaker 1: primary on a candidate named Carrick Flynn. Sam identifies him
Speaker 1: because he is an effective altruist who's expert in pandemic
Speaker 1: prevention without paying any attention to his viability as a candidate,
Speaker 1: and Carrick Flynn has, among other traits, fear of public speaking, deeply,
Speaker 1: deeply insecure, and upset when people say something critical about him.
Speaker 1: Lots of things that would be red flags in a
Speaker 1: political candidate.
Speaker 2: Was he from Oregon?
Speaker 1: At least he was a carbon bagger. I think he'd
Speaker 1: spent time there, but he'd basically been living in Washington
Speaker 1: for a long stretch. And Carrick Flynn ends up winning
Speaker 1: I don't know, twenty percent of the vote. That's one
Speaker 1: bucket of Sam Beckmer free spending is trying to get
Speaker 1: candidates into Congress or encourage actually elected representatives to take
Speaker 1: more interest in things like pandemic prevention.
Speaker 2: How would you rank on a scale of zerre to
Speaker 2: attend how much Sam actually cared about that issue?
Speaker 1: A lot nine and a half.
Speaker 2: And this was happening during COVID already, correct.
Speaker 1: Well, it just seemed like the one thing that's obvious
Speaker 1: to do is to build some equivalent of the National
Speaker 1: Weather Service for disease, global pathogen prediction and detection. And
Speaker 1: he was interested, not only interested in that, he was
Speaker 1: actually putting money into it. And I thought that's interesting.
Speaker 1: Alongside that Sam had decided all by himself, and much
Speaker 1: to the chagrin of other effective altruists, that Donald Trump
Speaker 1: presented a threat to democracy. Democracy was the most likely
Speaker 1: tool for addressing existential risk to humanity. So therefore Donald
Speaker 1: Trump needed to be stopped, and so he poured lots
Speaker 1: of money into anti Trump's stuff, and he did it.
Speaker 1: I think mainly through Mitch McConnell influenced packs and the
Speaker 1: idea there was to find, especially in Republican primaries, candidates
Speaker 1: who were not real Trumpers. Everybody was seeming to be
Speaker 1: a Trumper, and McConnell had distinguished between the people who
Speaker 1: really thought the election was rigged from the people who
Speaker 1: just say it, and the latter were maybe more likely
Speaker 1: to govern responsibly.
Speaker 2: And what's your sense of efficacy in that realm, if
Speaker 2: any at all?
Speaker 1: You know, it's funny. I don't know how influential the
Speaker 1: money was, though I think it was some tens of
Speaker 1: millions of dollars. But I did have a glimpse of
Speaker 1: Sam bankman Fried's style meddling. He's going to gamey meddling
Speaker 1: in this process. At the moment that we had this conversation,
Speaker 1: he was taking an interest in the Missouri Senate primary.
Speaker 1: There were two candidates at that time who seemed especially viable.
Speaker 1: Both were named Eric Eric Schmidt and Eric Britons. Eric
Speaker 1: Britons was a full throated Trumper. Eric Smith seemed to
Speaker 1: be taking it, at least so said McConnell's people. And
Speaker 1: Sam told me this isn't a private conversation. That his
Speaker 1: political operation had been having conversations with the Trump political
Speaker 1: operation because they were afraid Trump was going to jump
Speaker 1: into this race and endorse Eric Britons, the real Trumper,
Speaker 1: and that that would actually put Britons over the top.
Speaker 1: So they were trying to think of ways to stop
Speaker 1: this from happening, and they came up with this idea
Speaker 1: that they would tell Trump that just come out and
Speaker 1: say he was for Eric, without specifying which Eric, because
Speaker 1: both the candidates were named Eric, and that the argument
Speaker 1: to Trump was one it would be funny and be
Speaker 1: a meme and everybody would talk about it. And the
Speaker 1: second was he didn't care which Eric won. All he
Speaker 1: cared was that he backed the winner. So Sam's telling
Speaker 1: me this and I've said, how g real could this be?
Speaker 1: In the same breath he's telling me that he's offering
Speaker 1: Donald Trump five billion dollars not to run for president,
Speaker 1: And two days later, Trump comes out on True Social
Speaker 1: and says I'm for Eric, and indeed it was a meme,
Speaker 1: and indeed everybody thought it was funny, and indeed diffused
Speaker 1: Trump's in luence, and indeed Eric Schmidt won.
Speaker 2: Now you glossed over the plan to pay Trump directly
Speaker 2: five billion dollars to not run again in twenty twenty four.
Speaker 2: How real was that?
Speaker 1: I don't know. I could tell you where it was
Speaker 1: when I talked to him about it. It's funny in
Speaker 1: retrospect that he was worried it was illegal. The question
Speaker 1: was is it legal to pay Donald anybody not to
Speaker 1: run for president?
Speaker 2: Did you ever learn the answer that question.
Speaker 1: I haven't learned the answer to that question. Is it
Speaker 1: a bribe? Is it? But the practical point, and this
Speaker 1: is the point I actually made to Sam, I said,
Speaker 1: this is insane. If you give Donald Trump five billion
Speaker 1: dollars not to run for president, what do you think
Speaker 1: he's going to do? You know what he's going to do.
Speaker 1: He's going to take the five billion dollars and he's
Speaker 1: going to run for president. This is not like an
Speaker 1: enforceable contract. And it never I know that they had
Speaker 1: the conversations.
Speaker 2: Do you know at what level of the Trump organization
Speaker 2: or campaign he was speaking with.
Speaker 1: If I had to guess, we got to qualify that.
Speaker 1: I'm guessing that the CEO of FTX Digital Markets was
Speaker 1: a fellow named Ryan Salem, and Ryan Salem was Republican
Speaker 1: and apparently very friendly with Donald Trump Junior, and I
Speaker 1: had the impression that the conversation was happening between those two,
Speaker 1: but I don't know if that's true. Whatever channel it
Speaker 1: was was the same channel that got Trump to say
Speaker 1: I'm for Eric, so we know the channel exists. The
Speaker 1: question is could that ever have happened in real life?
Speaker 1: And I'm not sure it could ever have happened in
Speaker 1: real life. But it was a really good example of
Speaker 1: Sam Bekman Freed addressing a problem. It's like pretty original thought,
Speaker 1: pay him not to run?
Speaker 2: So would it have been illegal for Sam Bekman Free
Speaker 2: to pay Donald Trump five billion dollars to not run
Speaker 2: for president? The UK has a law that forbids, payment
Speaker 2: or promise of payment to get a candidate to withdraw
Speaker 2: from an election. In the US, it is less clear.
Speaker 2: People have been sent to prison for paying candidates to
Speaker 2: drop out, but in those cases the crimes were violations
Speaker 2: of campaign finance disclosure requirements, not the payments themselves. It
Speaker 2: is also against US law to bribe a public official
Speaker 2: to influence a quote official act, but it's not clear
Speaker 2: that running for office counts as an official act. Whatever
Speaker 2: the case, it's pretty clear that Sam Bankman Freed didn't
Speaker 2: have the chance to pay Donald Trump five billion dollars
Speaker 2: not to run. It's also worth noting that his mother,
Speaker 2: Barbara Freed, may have inspired this idea.
Speaker 1: Before Sam got rich. She had built a political operation.
Speaker 1: They were trying to find smarter ways to give money away,
Speaker 1: and it was pretty explicitly anti Trump. So Sam's first
Speaker 1: donations are through her.
Speaker 2: So You've said a couple things about Sam's parents that
Speaker 2: I find really interesting. They're in the book very you know,
Speaker 2: they're kind of often there but below the surface. Can
Speaker 2: you just draw out that relationship and tell me, you know,
Speaker 2: which directions the emotions flow these days, and what those
Speaker 2: emotions may be.
Speaker 1: I think one of the unusual things about the relationship
Speaker 1: between the parents and the child was the parents pretty
Speaker 1: quickly gave up on the idea he was a child.
Speaker 1: I remember Sam's mom, Barbara telling me that he was
Speaker 1: I don't know, eight years old and she had just
Speaker 1: written some abstruse paper for some academic journal, and he
Speaker 1: asks her what it's about, and she sort of humors him,
Speaker 1: but he pushes and presses, and she actually tells him
Speaker 1: what it's about, and she says his responses were smarter
Speaker 1: than the responses she got from the peer review. Couple
Speaker 1: with they made some brief pass at doing childish things
Speaker 1: with him. She took him to an amusement park and
Speaker 1: she was kind of hauling him from ride to ride
Speaker 1: and at some point she sees he's looking at her
Speaker 1: and just observing her, and he says, are you having
Speaker 1: fun yet?
Speaker 2: Mom?
Speaker 1: They both had the story in their head again even
Speaker 1: in good times, back when Sam was a billionaire, that
Speaker 1: he just he wasn't suited to childhood. He didn't connect
Speaker 1: with other people. What scared them, I think was he
Speaker 1: didn't fit into the world. They were really worried he
Speaker 1: would find no place for himself in the world. They
Speaker 1: thought his little brother was going to be fine and
Speaker 1: you know, might be a shining star. They thought Sam
Speaker 1: was never going to like work out because he was
Speaker 1: so socially maladjusted and indifferent. It was indifferent, like indifferent
Speaker 1: to any kind of social interaction. They were then bewildered
Speaker 1: when this child of theirs, is discovered by Jane Street
Speaker 1: and high frequency Trading as God's gift to trading, and
Speaker 1: all of a sudden is endowed with a new identity
Speaker 1: I made for the new financial markets, and then further
Speaker 1: perplexed when he quits that and becomes cryptobillionaire. Like they
Speaker 1: just find it completely implausible, just preposterous that he was
Speaker 1: in the position he was in, but accepted, right, you know,
Speaker 1: that's what happened to Sam now. I mean, obviously they're devastated.
Speaker 1: If I had to guess, they have slightly different views
Speaker 1: of the situation, But the mother is more vocal about
Speaker 1: her views, and I bet right now that she views
Speaker 1: Sam as chiefly a victim. That she thinks he's completely
Speaker 1: innocent of all wrongdoing, and she hasn't asked him what
Speaker 1: he did, so she doesn't know. She hasn't really pushed
Speaker 1: him on it. The truth of the relationship. And this
Speaker 1: is what I think the media generally in the commentary
Speaker 1: gets wrong, is that it, from Sam's point of view,
Speaker 1: was not that close. If you talk to the person
Speaker 1: who ran Sam's scheduling, she'd say the hardest part of
Speaker 1: my week is when one of his parents calls him,
Speaker 1: what's fifteen minutes with him? And I have to lie
Speaker 1: to him because I know Sam doesn't want to do it.
Speaker 1: That Sam kept them really at arm's length and didn't
Speaker 1: welcome their intrusion into his life. And the exception being
Speaker 1: is when he gets in trouble, like when he gets
Speaker 1: in trouble and there's no one else there. But I
Speaker 1: think it probably drives him crazy that first he's back
Speaker 1: in his parents' home under house arrest, and now the
Speaker 1: only people who visited him in jail are his parents.
Speaker 1: I don't think he welcomes parroting. He's never engaged with
Speaker 1: that relationship, so they're sort of imposing their parenting on
Speaker 1: him still and our heartbroken because he's their child and
Speaker 1: they love him.
Speaker 2: A listener wrote in to ask when do Sam Bankmin
Speaker 2: Freed's parents get indicted.
Speaker 1: I don't think the parents had a whole lot of
Speaker 1: insight into the In fact, I know they didn't. I
Speaker 1: would go from an interview with Sam or spending the
Speaker 1: day at the FTX headquarters, occasionally having dinner with the parents,
Speaker 1: and they were desperate for any kind of information about
Speaker 1: what was going on because they had no idea, like
Speaker 1: no idea. What looks probably more damning than it is
Speaker 1: but in retrospect, is that he bought this house in
Speaker 1: the Bahamas and put it in their name. But they were,
Speaker 1: like I promise you, they were only vaguely aware that
Speaker 1: they owned it. They didn't furnish it, they didn't care
Speaker 1: about it, and they gave it back right after it
Speaker 1: all fell apart that they couldn't get rid of it
Speaker 1: fast enough. What the dad was doing, he was mainly
Speaker 1: involved in the philanthropy. He was doing things like working
Speaker 1: with the Bahamas government to make sure that people who
Speaker 1: were in the psychiatric hospital had more contact with human
Speaker 1: beings outside the psychiatric He was really working full time
Speaker 1: as a do gooder. But I don't think either one
Speaker 1: of them are meaningfully evolved in the business.
Speaker 2: We should say. Joe Bankman and Barbara Fried currently face
Speaker 2: a civil lawsuit alleging that they are not as innocent
Speaker 2: as Michael Lewis claims. The suit argues that they quote
Speaker 2: exploited their access and influence within the FTX enterprise to
Speaker 2: enrich themselves. In any case, I did wonder what might
Speaker 2: have happened if one of Sam Bankman Fried's parents had
Speaker 2: been more involved in FTX, or if not them, some
Speaker 2: other potentially competent people who might have served as the
Speaker 2: adults in the room. Bankmin Freed had big plans for
Speaker 2: FTX and for himself. I asked Michael Lewis, if with
Speaker 2: the right help, Bankman Freed could have achieved those plans
Speaker 2: and avoided the law breaking.
Speaker 1: Yes. What stops it from happening right from the get
Speaker 1: go is Sam Bankman Freed's hostility to grown ups, including
Speaker 1: his parents. He took the view that basically everybody over
Speaker 1: the age of thirty five was a waste of time.
Speaker 1: And it's a very funny view he had. He's sort
Speaker 1: of in his mind in his judgment of people, he
Speaker 1: sort of punishes them for having any experience. He prefers
Speaker 1: people without experience who are just thinking about problems from
Speaker 1: the ground up, because he thinks of experience as kind
Speaker 1: of almost polluting their judgment. And what older people have,
Speaker 1: they have experience. But yes, if you twist the dial
Speaker 1: on Sam Bangner Freed's risk tolerance just a little bit, yes,
Speaker 1: there's like an army of accountants who are there at
Speaker 1: the beginning and the money is put in the right place,
Speaker 1: and so he's never tempted to use it, and he
Speaker 1: was pursuing a strategy which was probably viable, which was
Speaker 1: to be the legit crypto exchange, acquiring licenses left and right.
Speaker 1: They were growing fast. There was a billion dollars in
Speaker 1: revenue even the year they collapsed.
Speaker 2: One of the few adults in Sam bankman Fried's life
Speaker 2: was a man named George Lerner. He had been Bankman
Speaker 2: Freed's psychiatrist in California. Here's a passage from Going Infinite.
Speaker 1: Sam had long since decided that any discussions about his
Speaker 1: inner life and its consequences for others were futile. The
Speaker 1: social stuff was basically unsolvable. He said, he didn't need
Speaker 1: a therapist to deal with his problems, though he did
Speaker 1: need someone who could prescribe his medications. The problems that
Speaker 1: interested Sam were other people's problems. He soon figured out
Speaker 1: that George could be extremely useful with these.
Speaker 2: And so bankman Fried hired George Lerner and imported him
Speaker 2: to the Bahamas, where he took on a new role
Speaker 2: as a sort of internal consultant at FTX.
Speaker 1: A few months into his new job, George has seen
Speaker 1: one hundred of ftx's three hundred something employees he enjoyed
Speaker 1: maybe the single best view of its corporate architecture, with
Speaker 1: a clarity not available to its investors, its customers, its employees,
Speaker 1: and possibly the person who had created it. In the end,
Speaker 1: George drew up the only internal org chart ever made
Speaker 1: of Sam's sprawling creation. By the time he was done,
Speaker 1: he discovered many interesting things. Twenty four different people thought
Speaker 1: they were reporting directly to Sam. For example, this group
Speaker 1: did not include the chief financial officer because FTX did
Speaker 1: not have a chief financial officer. There was no chief
Speaker 1: risk officer or head of human resources because they had
Speaker 1: none of that either. Then there was Caroline Ellison. Caroline
Speaker 1: was apparently alone in charge of the twenty two traders
Speaker 1: and developers working inside Alometer Research.
Speaker 2: I wanted to ask you about George Lerner. I realized
Speaker 2: that his medical license wasn't valid in the Bahamas, so
Speaker 2: he wasn't at officially as a psychiatrist when he was
Speaker 2: talking to all these people, and therefore these conversations may
Speaker 2: not have been protected under doctor patient confidentiality. Still, I
Speaker 2: am curious why he was willing and able to tell
Speaker 2: you so much about these private conversations.
Speaker 1: I would be a very poor journalist if I ask
Speaker 1: people why they were talking to me. But I will
Speaker 1: tell you this that I knew I had a goal
Speaker 1: mine because he's very smart. He was very insightful. His
Speaker 1: first effective altruist patient was Sam's little brother, then Caroline Ellison,
Speaker 1: and only after a while did Sam become a patient.
Speaker 1: But by the time I meet him, he is serving
Speaker 1: as essentially the psychiatrist to the entire company in the Bahamas.
Speaker 1: They're rolling through his office, laying on his couch and
Speaker 1: complaining about the company. The Bahamas didn't give him a license,
Speaker 1: so at that point he really was just a whatever
Speaker 1: professional coach, and so he wasn't bound by any laws
Speaker 1: of confidentiality. But I never asked him.
Speaker 2: Caroline Ellison, who by twenty twenty two was running Alameda,
Speaker 2: was also Sam Bankman Fried's on again, off again girlfriend.
Speaker 2: During the collapse of FTX, they were off and barely speaking.
Speaker 2: It's tempting to wonder how things might have unwound differently
Speaker 2: if either a they had been speaking at the time,
Speaker 2: or b if Sam Bankman Freed had built an operation
Speaker 2: that didn't revolve around himself and just three other people
Speaker 2: who were the closest approximation he had to friends Caroline Ellison,
Speaker 2: Gary Wang, and Nishad Singh, all three of whom, by
Speaker 2: the way, would testify against him at trial. It took
Speaker 2: the jury just four hours to convict him and seven
Speaker 2: counts of fraud and conspiracy. After the break, Michael Lewis
Speaker 2: attended the trial. It was how to put this, It
Speaker 2: was no moneyball. I'm Stephen Dubner. This is freakonomics. Radio
Speaker 2: be right back. The trial of Sam Bankman Freed began
Speaker 2: on October third in the US District Court in Lower Manhattan.
Speaker 2: The lead up to the trial felt a bit like
Speaker 2: the lead up to a Super Bowl, two teams ready
Speaker 2: for a tense and exciting battle. Instead, it was a blowout.
Speaker 2: Every day it got a bit less exciting, a bit sadder.
Speaker 2: Bankman Freed's closest colleagues turned against him. The jury heard
Speaker 2: a steady stream of obviously incriminating evidence, and when Bankman
Speaker 2: Freed himself took the stand, there just wasn't much there there.
Speaker 2: He frequently said he couldn't recall saying things that others
Speaker 2: had said he said, and that he couldn't recall doing
Speaker 2: things that wouldn't seem at all hard to recall. If
Speaker 2: you were the person doing them. Michael Lewis attended this
Speaker 2: portion of the trial.
Speaker 1: I knew that Sam Bangnerfried marched to the beat of
Speaker 1: his own drum, that he was his own peculiar person,
Speaker 1: with his own peculiar motives for doing these peculiar things
Speaker 1: that he did, and this would have made him such
Speaker 1: an interesting character to write about. I thought, if he
Speaker 1: was going to take the witness stand, he would have
Speaker 1: some strategy, some reason for doing it, and it was
Speaker 1: that was a big mistake.
Speaker 2: So you were not called as a witness in the trial, which,
Speaker 2: I'll be honest surprised me a little bit. Did it
Speaker 2: surprise you.
Speaker 1: My sense is that lawyers are risk averse and they
Speaker 1: don't like to put on the witness stand people they
Speaker 1: can't completely control.
Speaker 2: And why can't you be controlled? Michael?
Speaker 1: The problem is the prosecutors asked me some questions and
Speaker 1: I'd say some things that were pretty damning about Sam,
Speaker 1: but it would open me up to the defense and
Speaker 1: they'd say, I don't know, when you met him, did
Speaker 1: you think he was dishonest? No, I didn't think he
Speaker 1: was dishonest. When men him, I thought he was curiously forthright,
Speaker 1: you know whatever, it was, and I saw this with
Speaker 1: another witness. The prosecution to teed up a person whose
Speaker 1: title was head of product. His name was Ramnik Aurora,
Speaker 1: who was actually Sam's right hand man in making lots
Speaker 1: of the venture capital investments. He didn't have anything to
Speaker 1: do with the product, but he had had his plane ticket,
Speaker 1: he had his hotel room. He thought he was testifying
Speaker 1: right after Nashad Sing and they canceled him last minute.
Speaker 1: And I think I could be wrong about this. It's
Speaker 1: possible to cancel me because he just decided they didn't
Speaker 1: need him. But I think between the time they teed
Speaker 1: him up and the time they called him, they read
Speaker 1: my book and they saw that he presented the same
Speaker 1: kind of problem I would present, because yes, he could
Speaker 1: tell you about how Sam continued to spend lots of
Speaker 1: money even after he should have been aware that he
Speaker 1: was spending the customer's money. But there's this moment in
Speaker 1: the book that I think is very revealing. And they
Speaker 1: didn't get any attention to the trial. When it all
Speaker 1: blows up in early November of last year and Caroline
Speaker 1: Ellison and Sam Bankman Freedom and a Shad Singer and
Speaker 1: Gary Wang or interroom trying to figure out how much
Speaker 1: money they have to give customers their deposits back, and
Speaker 1: they call Romnick over, and Romick walks into the room
Speaker 1: and he says, they are literally like trying to figure
Speaker 1: out which exchanges they have accounts on where do they
Speaker 1: have bank accounts? And Roomick's phone rings and it's from
Speaker 1: a bank delf Tech in Bahamas, and the guy is
Speaker 1: on the other a line says to Romnick. He says,
Speaker 1: I see you guys in trouble. You should know you
Speaker 1: have you have an account here with three hundred million
Speaker 1: dollars if you need it. And Ramick says this to them,
Speaker 1: and none of them have any idea of it, and
Speaker 1: the pure chaos of the thing again, it's like a
Speaker 1: witness who has when you've been that close. You have
Speaker 1: evidence for both sides, and neither side wants you to
Speaker 1: hear both sides.
Speaker 2: So as you're describing, it strikes me that what you
Speaker 2: have is just a different category of information than the
Speaker 2: kind of information that is useful at a trial for
Speaker 2: either side. Let's say, yes, that's true, but it also
Speaker 2: it just makes me wonder what it's like for you.
Speaker 2: You were sitting here watching a live criminal trial that
Speaker 2: is essentially based on a book that you wrote. We've
Speaker 2: all heard what it's like to write a book and
Speaker 2: then see the movie based on it, and you've had
Speaker 2: more experience with that than most people. And the expectation
Speaker 2: is that the movie will, of course be very different
Speaker 2: from the book. But this was differently different. So what
Speaker 2: was the experience like?
Speaker 1: It's funny you draw that analogy, because it was similar
Speaker 1: in this way. When someone takes one of your books
Speaker 1: and turns it into a movie, they compress it, they
Speaker 1: distort it, and they compress it, and you just hope
Speaker 1: they don't lose the spirit of it. Right, They're turning
Speaker 1: one hundred thousand words into an eight thousand words script,
Speaker 1: so they're bound to leave all kinds of stuff out,
Speaker 1: and you hope when you watch it feels the way
Speaker 1: you felt when you wrote the Thing.
Speaker 2: And the movies that have been made from your books,
Speaker 2: like The Big Short, Moneyball, The blind Side, I gather
Speaker 2: that from your perspective, those were successfully done.
Speaker 1: Yes, I felt in each case that more or less
Speaker 1: the spirit of the thing was preserved and the movies
Speaker 1: weren't boring. In the trial, I felt the spirit of
Speaker 1: the thing was more distorted than the movies distorted. And
Speaker 1: also the thing that was striking in the trial. We
Speaker 1: take it for granted in our legal system, these plea
Speaker 1: bargaining agreements, they're essentially corrupt. I mean, they're very useful
Speaker 1: tools for prosecutors, but essentially the prosecutors are able to
Speaker 1: pay people with years of their lives to say stuff
Speaker 1: on a witness stand so long as it's not falsifiable,
Speaker 1: if it serves the purpose of the prosecutors, they get
Speaker 1: rewarded for it.
Speaker 2: What's it for instance? Here?
Speaker 1: For instance here is it was a pretty common pattern
Speaker 1: in the three principal witnesses was how they felt at
Speaker 1: the time. Nishad saying was telling a story about how
Speaker 1: dark and miserable he was a year ago, and that
Speaker 1: he was aware that they were doing wrong things. And
Speaker 1: I interview this an up and down. He was giddy
Speaker 1: with how things were going, and he would say things
Speaker 1: to me. I mean, in the book, he says, back
Speaker 1: in twenty eighteen, when he's twenty one years old and
Speaker 1: joining Sam Banknerfried in the crypto trading firm, he says,
Speaker 1: how quickly he figures out that the law isn't what's
Speaker 1: written in the laws which you can get away with
Speaker 1: and which you can't get away with. He's saying things
Speaker 1: to me that you don't say if you're feeling at
Speaker 1: all worried that people are going to suspect you're doing
Speaker 1: a bad thing. So they were able to misremember their
Speaker 1: states of mind, and the states of mind they described
Speaker 1: themselves having been in were alien to anybody who observed
Speaker 1: them at the time.
Speaker 2: Were you really surprised that there is that trade off
Speaker 2: for sort of bribing as you're describing it.
Speaker 1: Well, I knew it existed, right, It was just watching
Speaker 1: the effects of it. You know, we get our legal
Speaker 1: system from the English, and the English are shocked we
Speaker 1: allow this. It's not obvious that we should. It was
Speaker 1: viewed as corrupt until not that long ago. It's now
Speaker 1: just bewoven into the texture of our criminal justice process.
Speaker 1: If I was sitting in the jury box, I would
Speaker 1: certainly have convicted. But when you back away from it
Speaker 1: and you see just how uneven the playing field is
Speaker 1: between the prosecutors in the defense. The prosecutors have unlimited resources.
Speaker 1: They have power to scare people into testifying. They getting
Speaker 1: cut plea deals with people. You see why the stats
Speaker 1: are as shocking as they are.
Speaker 2: You mean the conviction stats.
Speaker 1: Last year, ninety nine point six percent of the people
Speaker 1: who were charged with federal crimes either pled guilty or convicted.
Speaker 2: So why did bankman Fried testify himself when so many
Speaker 2: of his answers were essentially I don't recall.
Speaker 1: It's a great question, go back even further, knowing what
Speaker 1: he supposedly knew. Why did he stay in the Bahamas
Speaker 1: when it all fell apart? If you just gone to
Speaker 1: Dubai still be there, did.
Speaker 2: You ask him that why he stayed?
Speaker 1: Yeah, yeah, yeah, I mean I can tell you what
Speaker 1: he said. He said because I didn't do anything wrong.
Speaker 1: I mean, if you wanted the answer to all those
Speaker 1: questions is because he thinks he did nothing wrong. He
Speaker 1: thinks that his error was not paying attention. That's the
Speaker 1: story he's told himself. The prosecutors, I think, were maybe
Speaker 1: a little surprised by just how well their case went,
Speaker 1: because there was in the summing up when they were
Speaker 1: making the argument to the jury about why they needed
Speaker 1: to convict they said, even if you believe this guy,
Speaker 1: believe that he just wasn't paying attention to this eight
Speaker 1: billion dollars that he took from the customers and used
Speaker 1: in his private fund. There's this idea called conscious avoidance,
Speaker 1: and that doesn't let you off a hook if you
Speaker 1: just didn't pay attention. But I think Sam, I think
Speaker 1: the simple way to explain all his behavior is his
Speaker 1: animate in his own mind, that he didn't do anything wrong.
Speaker 2: I'm curious to know what you learned, if anything, at
Speaker 2: the trial, but especially I want to know what you
Speaker 2: thought you might learn at the trial, and whether you
Speaker 2: did or didn't.
Speaker 1: There were a couple of things that I really wanted
Speaker 1: to know that in retrospect, maybe the trial wasn't the
Speaker 1: best way to get it. But if he can't get
Speaker 1: at it through the trial, I don't know where you're
Speaker 1: going to get at it through. I really did want
Speaker 1: to know the moment when the sum total of liquid
Speaker 1: assets in Sam's world combination Alameda and FTX was less
Speaker 1: than the customer deposits, Like when did he go negative?
Speaker 2: There is that a knowable fact.
Speaker 1: It could be figured out. The bankruptcy people might know already.
Speaker 1: Wind should have everyone had alarm bells ringing in their heads,
Speaker 1: because I didn't see any sign of alarm bells ringing
Speaker 1: in anybody's head until it blew up. There's another thing.
Speaker 1: When it all fell apart, I was doing this crude
Speaker 1: exercise of figuring out all the money that had come
Speaker 1: into Sam's world and all the money that had left
Speaker 1: it in the form of customer deposits or venture capital
Speaker 1: investments or expenditure on political campaigns. And to this day
Speaker 1: this still seems to me several billion dollars that I
Speaker 1: can't figure out where they went. There's been some hand
Speaker 1: wavy explanations about how it might have been lost. I'm
Speaker 1: not sure it has been lost. It's possible. The bankruptcy
Speaker 1: people still finding literally finding money the way you find
Speaker 1: easter eggs.
Speaker 2: These bankruptcy people are being led by John Ray, who
Speaker 2: was installed as the emergency CEO of FTX by the
Speaker 2: law firm Sullivan and Cromwell. We had Ray on the
Speaker 2: show earlier this year talking about the singular challenge of
Speaker 2: taking over FTX. That was episode five sixty. We called it,
Speaker 2: is this the worst job in Corporate America? Or maybe
Speaker 2: the best. Here's what Michael Lewis wrote about John Ray
Speaker 2: and the process by which he came to replace Sam
Speaker 2: Bankman Freed as CEO.
Speaker 1: The Wild and wonderful world of US corporate bankruptcy was
Speaker 1: increasingly dominated by big law firms, but there were still
Speaker 1: a few of these lone actors like Ray, who played
Speaker 1: the role of wildcatters. The law firms brought in the
Speaker 1: wildcatter to take over as CEO of the failed firm,
Speaker 1: and the wildcatter in turn hired the law firms as
Speaker 1: a legal matter. At four point thirty in the morning
Speaker 1: on Friday, November eleventh, twenty twenty two, Sam Bank and
Speaker 1: freed Docu signed FTX into bankruptcy and named John Ray
Speaker 1: as ftx's new CEO. As a practical matter, Sullivan and
Speaker 1: Cromwell lined up John Ray to replace Sam as the
Speaker 1: CEO of FTX, and then John Ray hired Sullivan Cromwell
Speaker 1: as the lawyers for the massive bankruptcy. I mean, the
Speaker 1: problem with the bankruptcy process is that it's designed to
Speaker 1: maximize the number of billable hours. It's designed to go
Speaker 1: on forever and ever and ever, and it's going to
Speaker 1: cost a billion dollars. It's crazy.
Speaker 2: Is that more on Ray or more in Solivon Cromwell
Speaker 2: or just the way the system works.
Speaker 1: The way the system works, the system's nuts.
Speaker 2: What would you propose instead.
Speaker 1: I think that needs to be a regulator. At the moment,
Speaker 1: there's no oversight. They is someone call the bankruptcy trustee,
Speaker 1: who's an employee of the Department of Justice, who has
Speaker 1: no teeth, his ability to write angry letters to the judge,
Speaker 1: and he has saying it's outrageous how this is being run.
Speaker 1: But the judge can just ignore it.
Speaker 2: Now that you've seen the trial, if you had to
Speaker 2: write the book over again, what would you do different?
Speaker 1: The one thing I would have loved to have known.
Speaker 1: I love the idea in their pillow talk of Sam
Speaker 1: saying to Caroline that there was a five percent chance
Speaker 1: he would be president of the United States. I feel
Speaker 1: like I was robbed of material.
Speaker 2: One more reason I'm just thinking now about why the
Speaker 2: book got a different reception than one might have anticipated
Speaker 2: is because it came out around the same time as
Speaker 2: Walter Isaacson's bio of Elon Musk, and Walter gets to
Speaker 2: spend a lot of time with his subjects, also living subjects.
Speaker 2: At least. I haven't read Walter's book, but my read
Speaker 2: of the reviews is that he praises Musk's accomplishments while
Speaker 2: laying out the ways in which personally he's kind of
Speaker 2: an asshole, and Musk is still the richest guy in
Speaker 2: the world and at the top of his game. Sam
Speaker 2: had been defenestrated by the time the book came out,
Speaker 2: And I wonder if maybe I don't know, it's the
Speaker 2: right kind of target for the right kind of times,
Speaker 2: and you didn't shoot an arrow through that target.
Speaker 1: Well, I can't write it any other way than it was.
Speaker 1: It would have been bizarre to try to pretend that
Speaker 1: Sam Bangertfried was obviously evil to everybody around him. It
Speaker 1: would have failed to grapple with why all these people
Speaker 1: got the smartest fetcher. Capitalists, important politicians, celebrities are enthralled
Speaker 1: by him. How stupid would it be not to create
Speaker 1: some of the charm that led him finding himself in
Speaker 1: the position he was in.
Speaker 2: There is a particularly revealing scene, particularly sad scene, toward
Speaker 2: the end of Lewis's book. This happens after FTX had cratered,
Speaker 2: but before bankman Freed had been arrested, and even though
Speaker 2: most of his employees had fled the Bahamas, he stayed on,
Speaker 2: and so did Constance Wang, the chief operating officer of FTX.
Speaker 2: She had been bankman and Freed's eighth higher Michael Lewis
Speaker 2: was also in the Bahamas. Then here's what he writes.
Speaker 1: For the better part of the month, I watched Constance
Speaker 1: return from her encounters with Sam. Over and over. She
Speaker 1: confronted Sam with the suffering he'd inflicted upon the very
Speaker 1: people who'd been the most loyal to him. Most FTX
Speaker 1: employees had lost their life savings. Some had lost their spouses,
Speaker 1: their homes, their friends, and their good names. There were
Speaker 1: Taiwanese employees of FTX still in Hong Kong who couldn't
Speaker 1: afford plane tickets home. I asked, Sam said, Constance, when
Speaker 1: you were doing this, have you ever thought how much
Speaker 1: this event will be hurting people? Even here? However, she
Speaker 1: found herself talking past Sam. In his telling he hadn't
Speaker 1: realized how much risk he'd subjected others to without their permission.
Speaker 1: Constance nevertheless sense that he didn't really register the damage
Speaker 1: he'd caused to other people in the way that say
Speaker 1: she might have as absolutely zero empathy. She said, that's
Speaker 1: what I learned that I didn't know he can't feel anything.
Speaker 2: So did Sam read your book?
Speaker 1: I've not spoken to him since he was hauled off
Speaker 1: to jail on August the eleventh. I was told by
Speaker 1: his lawyers that they snuck it into him on a
Speaker 1: drive that had all of the legal documents. But I
Speaker 1: don't know what he thought about it. He's the one
Speaker 1: person who hasn't ventured an opinion about my book.
Speaker 2: What's your opinion? Our email is radio at freakonomics dot com.
Speaker 2: The book is called Going Infinite, The Rise and Fall
Speaker 2: of a New Tycoon by Michael Lewis. Freakonomics Radio is
Speaker 2: produced by Stitcher and ren Bud Radio. This episode was
Speaker 2: produced by Ryan Kelly. The excerpts you heard from Going
Speaker 2: Infinite were read by the author, Michael Lewis, from an
Speaker 2: audiobook produced by Audible Studios. Our staff also includes Elina Cullman, Eleanor,
Speaker 2: Osborne Else, Hernandez Gabriel Roth, Greg Rippon, Jasmin Klinger, Jeremy Johnston,
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Speaker 2: Fortune by The Hitchhikers. The rest of the music in
Speaker 2: this episode was composed by Luis Gera Michael Riola, and
Speaker 2: Stephen Ulrich. You can find our entire archive on any
Speaker 2: podcast app or at freakonomics dot com, where we also
Speaker 2: publish transcripts and show notes. As always, thanks for listening.
Speaker 2: I have approximately a million more questions, but it is
Speaker 2: one o'clock. You gotta go, I assume, yeah, yeah, I
Speaker 2: do have to go. All right, this was fun, my hope,
Speaker 2: it was fun.
Speaker 3: The Freakonomics Radio Network, The Hidden Side of Everything, Stitcher,