Following the collapse of FTX, many of us have been asking ourselves:
What should members of the EA community have done differently, given the information they had at the time?
I think that proposed answers to this question are considerably more useful if they meet (and explicitly address) the following three criteria:
(1) The (expected) benefits of the proposal outweigh the costs, given information available at the time.
(2) Implementing the proposal would have been realistic.
(3) There is a somewhat detailed, plausible story of how the proposal could have led to a significantly better outcome with regard to the FTX collapse.
Hopefully it's clear why we want the first two of these. (1) is EA bread and butter. And (2) is important to consider given how decentralized EA is: if your proposal is "all EAs should refuse funding from a billionaire without a credible audit of their finances", you face a pretty impossible coordination problem.
But most of the proposals I've seen have been failing (3). Here's a proposal I've heard:
The people SBF was seeking out to run the FTX Foundation should have requested an audit of FTX's finances at the start.
This isn't enough for me to construct a detailed, plausible story for things going better. In particular, I think one of two things would have happened:
- The FTX leadership would have agreed to a basic audit that wouldn't have uncovered underlying problems (much as the entire finance industry failed to uncover the problems).
- The FTX leadership would have refused to accede to the audit.
In the first case, the proposal fails at accomplishing its goal. In the second case, I want more details! What should the FTX Foundation people have done in response, and how could their actions have led to a better outcome?
A more detailed proposal:
The people SBF was seeking out to run the FTX Foundation should have requested a thorough, rigorous audit of FTX's finances at the start. If FTX leadership had refused, they should have refused to run the FTX Foundation.
This still isn't detailed enough: SBF would have just asked someone else to run the Foundation. It seems like the default outcome is that someone who's a bit worse at the job would have been in charge instead.
A more detailed proposal:
The people SBF was seeking out to run the FTX Foundation should have requested a thorough, rigorous audit of FTX's finances at the start. If FTX leadership had refused, they should have refused to run the FTX Foundation and made it public that FTX leadership had refused the audit. Then, EA leaders should have discouraged major EA organizations from taking money from the FTX Foundation and promoted a culture of looking down on anyone who took money from the Foundation.
This is starting to get to the point where something could have realistically changed as a result of the actions. Maybe the pressure for transparency would have been strong enough that SBF would have acceded to an audit -- though I still think the audit wouldn't have uncovered anything. Or maybe he wouldn't have acceded, and for a while EA organizations would have refused his money, before eventually giving in to the significant incentives to take the money. Or maybe they would have refused his money for many years -- in that case, I would question whether criterion (1) is still satisfied (given only information we would have had at the time, remember). But at least we have a somewhat detailed story to argue about.
Without a detailed story, it's easy to convince yourself that the change you propose would have plausibly averted the disaster we face. A detailed story forces you to spell out your assumptions in a way that makes it easier for other people to poke holes or point out disagreements.
I have yet to hear a proposal that in my opinion satisfies all of (1)-(3). It would be nice to see some in the coming weeks. (And if I don't encounter any, that will be pretty interesting too.)
To be clear, I'm endorsing correct consequentialism here, not naive consequentialism. The benefits and costs may not be obvious, and weighing them may in practice involve invoking deontological principles.
This is for a few reasons. First, FTX was audited. Second, my current guess is that the $10 billion transfer from FTX to Alameda occurred after the FTX Foundation and the Future Fund were set up. Third, I think that realistically, the audit that would have been negotiated in this process would have given FTX leadership the opportunity to cover their tracks.