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What is effective altruism, the philosophical movement linked to former FTX founder Sam Bankman Fried?

After the debacle of the firm, some critics are pointing out how the movement’s underlining ideals could have triggered SBF’s propensity to risk, and more so provided a shield for the way he was running his company.

FTX founder Sam Bankman-FriedAfter Sam Bankman-Fried left his Wall Street career, he worked with an EA-allied organisation called the Center for Effective Altruism, before FTX. (Photo via Bloomberg)

Since cryptocurrency trading firm FTX went bankrupt and it came to light it was extending loans to its sister foundation Alameda, using the money customers had deposited on the exchange, there has been a spotlight on the Effective Altruism (EA) philosophy championed by its founder.

In an interview with Forbes in May this year, Sam Bankman-Fried (or SBF as he is popularly known), the founder and former CEO of FTX, said: “In the end, my goal is to do as much good as I can for the world. I am part of the effective altruism community. It’s basically a group of people trying to figure out how you want to maximise the good that you do, the positive impact you have on the world. What does that imply? What does that mean you do with your life?… I got into finance in the first place to try and maximise the amount I can donate to some of the most effective causes.”

Such statements were part of the 30-year-old’s long-cultivated image of being an altruistic billionaire. He once appeared in a YouTube video titled “The Most Generous Billionaire”, handing out money on the street. Post the bankruptcy, the EA community is appearing to distance itself from SBF, with EA co-founder William MacAskill recently tweeting, “The EA community has emphasised the importance of integrity, honesty, and the respect of common-sense moral constraints… A clear-thinking EA should strongly oppose ‘ends justify the means’ reasoning.”

What is Effective Altruism?

As per its website, “Effective altruism isn’t one organisation, but a broad community of people working on a diverse set of projects with a common goal: doing as much good as possible.” Some of the projects that the site lists include the charity organisation Against Malaria Foundation and a research centre at Oxford, among others.

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While this might look like any other philanthropic organisation, EA differentiates itself, and in its own words, focuses on “finding ways of doing good that actually work”. This means “evidence and reason” are used, “to figure out how to benefit others as much as possible, and taking action on that basis.” Data, statistics, and impact are described as the key aspects. In an interview with MacAskill, The Guardian called EA a community that would “bring data-based analysis to the business of charity, thus making donations as effective as possible.”

What does EA look like in practice?

It works on an “earning to give” model, implying careers that are “effective” need to be chosen in order to do exactly what the statement says: give. Therefore, in pursuit of this, EA presents a career choice as “the most important ethical decision of your life”. The movement would argue that a lucrative career that could help amass wealth needs to be chosen, to give away a sizable amount of that wealth to society by working with “high-impact” charities.

As per a profile of SBF by Venture Capital firm Sequoia Capital, MacAskill, who is currently an Associate Professor in Philosophy and Research Fellow at the Global Priorities Institute, met Fried when he was a physics student at the Massachusetts Institute of Technology (MIT).

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It was on his advice that SBF first began his career trading securities in New York, instead of the “more public-spirited” options he was considering, like “becoming a journalist or entering politics directly,” reported CoinDesk, a news website on Bitcoin and other digital currencies.

Why is it being criticised now, and where do things stand?

After SBF left his Wall Street career, he worked with an EA-allied organisation called the Center for Effective Altruism, before FTX. SBF also founded organisations such as FTX Future Fund and the FTX Foundation, both of which had prominent EA staffers, including MacAskill, The Guardian noted in an opinion piece.

Forbes reported that Bankman-Fried and his team had “agreed to collectively fund the FTX Foundation, which set out in 2021 to give billions of dollars away over the coming decades.” It added, “Practically overnight, he made himself into effective altruism’s most famous proponent and one of its biggest financial contributors.

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Bankman-Fried stepped down as CEO of FTX on November 11, right before his company filed for Chapter 11 bankruptcy. It said it could owe money to more than 1 million creditors. SBF also recently wrote a lengthy internal letter to his staffers, apologising for the collapse.

The entire Future Fund team resigned a day prior to SBF. Fortune reported that in an open letter afterwards, the team wrote it was “devastated that it looks like there are many committed grants that the Future Fund will be unable to honour.” After the debacle of the firm, critics are also pointing out how the movement’s underlining ideals could have triggered SBF’s propensity to risk, and more so provided a shield for the way he was running his company.

In an opinion piece for The Guardian, philosophy professor at Georgetown University Olúfẹ́mi O Táíwò, and Joshua Stein, a postdoctoral fellow at Georgetown, wrote: “Former effective altruists have proposed ‘structural reforms’, some of which echo broader calls for ‘participatory funding’ – democratic control of philanthropic organizations by those who are impacted by the organizations’ endeavours. These criticisms seem to have been largely ignored in favour of a tech and capital-friendly research agenda – and a system controlled by the few with enough money or access to participate.”

First published on: 26-11-2022 at 10:02 IST
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