Michael Lewis’s Big Contrarian Bet

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By Usa Express Daily

Almost immediately after the cryptocurrency exchange FTX imploded last November, an agent e-mailed Hollywood buyers to reveal that the writer Michael Lewis just happened to have spent the previous six months hanging around Sam Bankman-Fried. Lewis, the agent noted, “hadn’t written anything yet,” but the recent developments had provided “a dramatic surprise ending to the story.” Nobody would have argued that point. But Lewis didn’t appear to regard this unexpected climax the way everyone else did. According to the agent, the writer had likened Bankman-Fried’s archrival, Changpeng Zhao—who had helped set in motion the bank run that brought FTX down—to “the Darth Vader of crypto” and Bankman-Fried to Luke Skywalker. This might not have been a particularly weird thing to say a month earlier. But it was a very weird thing to say at a moment when Bankman-Fried’s alleged misdeeds had made him not simply the “main character” on Twitter but in much of the actual world. Bankman-Fried stood accused of having defrauded his exchange’s customers of something like eight billion dollars, which he had apparently used to prop up his flailing crypto-trading firm, Alameda Research. Furthermore, he had funnelled, or attempted to funnel, his illicit gains into all sorts of nonsense: naming rights to stadiums, Bahamian luxury real estate, a Pacific island where his confederates might ride out one minor apocalypse or another.

Bankman-Fried, the son of two Stanford Law School professors, seemed to have walked out of a cave one day and become one of the richest people in the world: according to Forbes, which at one point conservatively estimated his fortune at about twenty-six billion dollars, he was second only to Mark Zuckerberg in the speed of his wealth accumulation. His overnight fame was due in part to the candor and alacrity with which he conceded that crypto was mostly a scam; as an advocate for clear government regulations, he positioned himself as an unlikely grownup in the industry. And it was due in part to his charitable donations—as an effective altruist, he planned to give all his money away. In November of last year, the trade publication CoinDesk published a leaked balance sheet that indicated all was not well inside the house of Bankman-Fried. After Zhao, the head of the crypto exchange Binance, tweeted his readiness to dump his financial stake in FTX, customers rushed to withdraw whatever remained of their funds. In about a week, Bankman-Fried was forced to declare bankruptcy. A month later, he was extradited from the Bahamas, where he was indicted on multiple counts of fraud. He has consistently maintained that the whole thing was more or less an accounting mishap, and has pleaded not guilty. During his trial, Bankman-Fried’s lawyer told the court, “It’s not a crime to run a business in good faith that ends up going through a storm.” If convicted, he could face more than a century in prison.

Until the collapse of the Bankman-Fried empire, he seemed like an archetypal character for Lewis—the good kind of barbarian at the gate. Then all of a sudden he appeared less of a Jim Clark, the founder of Netscape and an early figure in the Lewis pantheon, and more of a Michael Milken, who made a dubious fortune on junk bonds. Lewis, however, has never seemed particularly invested in villains, and, over the past eleven months or so, speculation about his new book, “Going Infinite,” has become a parlor game among journalists. The representative Lewis subject—Billy Beane in “Moneyball,” Michael Burry in “The Big Short”—is a winning contrarian, someone with the brilliance and confidence to see something no one else could, and to wager on it. This might have seemed an apt description of Bankman-Fried when Lewis began following him, in the spring of 2022; in Zeke Faux’s new book about the crypto frolic, “Number Go Up,” he witnesses Lewis interview Bankman-Fried at a conference in the Bahamas, where “the author’s questions were so fawning they seemed inappropriate for a journalist.” The consensus, six months later, was that Bankman-Fried was less of an unkempt prophet than an oafish charlatan. Was Lewis prepared to pivot from an admiring account to a skeptical one? Was he interested in telling this kind of story, or even capable of it?

In the run-up to the book’s publication, which was set to coincide with the first day of Bankman-Fried’s trial, it started to look as though Lewis had not pivoted at all. On Sunday night, when Lewis appeared on “60 Minutes” to discuss the book, he came out as willing to entertain the possibility that Bankman-Fried had genuinely just lost track of the customer money—that, although he was obviously guilty of egregious mismanagement, it was not clear to Lewis that he had knowingly committed fraud. CoinDesk wrote an editorial called “Is Michael Lewis Throwing Out His Reputation to Defend Sam Bankman-Fried?,” arguing that the interview “all but solidified the idea that ‘Going Infinite’ (Lewis’ 21st book), will be a hagiography of Sam Bankman-Fried.” The book is not, as it turns out, a hagiography. Bankman-Fried is not portrayed as a hero. But he isn’t portrayed as an antihero, either. The book’s tone is one of tender beguilement, with the occasional flash of remonstrance; Lewis isn’t sympathetic, exactly, but he is defiantly open to evidence of Bankman-Fried’s innocence. Bankman-Fried does come off as a recognizable contrarian. But perhaps the most relevant contrarian subject in this magnificently ambiguous book is Lewis himself. Lewis likes to write about figures who survey the informational landscape, weigh the probabilities, and, under conditions of uncertainty, take expensive gambles—which is exactly what Lewis himself has done.

Lewis’s affections have never been limited to iconoclasts. He also puts a premium on the category of “people who do their job well”—as in “The Fifth Risk,” the best of his recent books, about the uncredited foot soldiers of the civil service—and the category of “children.” Some of his child subjects don’t behave like children: in a famous piece from the early dot-com era, he profiled a teen-ager who became one of the most sought-after advisers on a forum for legal consultations. He wrote a sentimental book about fatherhood. Sometimes the children he’s written about are children only in a metaphorical sense: a running thread of “The Big Short” is that the financial crisis happened because there weren’t enough adults in the room. What he admires in a child is a useful kind of naïveté, which allows them to see through an adult world of pretense and convention.

Bankman-Fried is, in Lewis’s account, someone who both never had a real childhood to speak of—his parents began to talk to him as an adult at the age of eight, and he is nearly incapable of producing any character witnesses from before the age of eighteen—and who remains a child. Bankman-Fried is bored by a certain kind of adult stupidity; he has no patience for academia, which he describes as “one long canned talk, created mainly for narrow career purposes.” He is scornful of what he sees as inherited truisms: Shakespeare, it seemed to him by high school, “relies on, simultaneously, one-dimensional and unrealistic characters, illogical plots and obvious endings.” People who believed otherwise just weren’t thinking logically—which, for Bankman-Fried, meant focussing on the underlying statistics. As he asked in a blog post as a college sophomore, “What are the odds that the greatest writer would have been born in 1564?” Even once he is no longer technically a child, he still acts like one. Lewis often seems conflicted about Bankman-Fried’s disregard for the statutes of manhood. On the one hand, why should Bankman-Fried wear anything other than rumpled cargo shorts to fancy Hollywood parties? On the other hand, people who testify before Congress should bother to tie their shoes.

When it comes to the kind of adulthood Lewis respects, Bankman-Fried acquits himself poorly. Lewis is committed to professional standards, and emphasizes that Bankman-Fried seems exceptionally bad at the aspects of his job that involve scruples or responsibility. As an aspiring corporate mogul in his late twenties, he steadfastly refuses anything like orderly supervision—no org chart, no compliance, no human resources, no oversight at all. Lewis’s best-selling début, “Liar’s Poker,” introduced him as something of a Pharisee—the antics of eighties bond traders struck him as vulgar. But that life had its crude satisfactions as well, and one way to read the arc of his career is to suggest that Lewis has spent the past two decades wondering whether success should be measured by principle or by consequence. Michael Burry made a lot of money by betting on an outcome that would cause a lot of human misery, but he was also right about subprime mortgages. Lewis is, in other words, a moralist who has dedicated his career to an exploration of pragmatism.

The first part of “Going Infinite” is dedicated to an examination of what Bankman-Fried is not. He doesn’t much care about people one way or the other, and he admits to feeling no emotion. Perpetually bored, he requires constant entertainment—most often in the form of complex games, like “Magic: The Gathering,” in which the players are routinely wrong-footed by shifting rules. He makes commitments not out of any sense of emotional conviction but on the basis of mathematics and logic: his veganism, for example, has nothing to do with an affection for animals, about which he couldn’t care less, but with a detached ability to compute the sum of their suffering. His acceptance of effective altruism, a movement devoted to the rational improvement of our lives, as an “intellectually coherent sense of purpose” is similarly bloodless. He feels permanently misunderstood but lacks most if not all the things the rest of us might call desires.

He does, however, like to win. It’s not until the end of his time at M.I.T., where he half-heartedly studied physics and served as the “Commander” of his nerd frat, that he at last comes to ascertain what makes him special. In an interview for a job at Jane Street, a trading firm, he’s put through a day of slantwise games. What he discovers, in Lewis’s telling, is that he’s preternaturally well suited to pressurized environments where high-stakes decisions must be made in haste and with limited or occluded information. He also learns that an adversary who proposes a bet is providing you with information encoded in the bet itself. When one interviewer asks him what the odds are that the interviewer himself has a relative who plays professional baseball, Bankman-Fried does the relevant math—how many professional baseball players exist, how many relatives most people tend to have—and figures that the answer is about one in one thousand. But then he stops himself—was the question chosen at random, or was it chosen because the interviewer had some personal connection to it? Bankman-Fried dramatically increases his proposed odds. He gets a job, and thrives as a trader.

Bankman-Fried’s greatest talent, Lewis believes, is his ability to appraise the expected value of a bet on the basis of a roughly grasped probability distribution. This isn’t just about money—although Bankman-Fried goes on to make an ungodly amount of it in a very short time. He leaves Jane Street to found his own proprietary crypto trading firm, Alameda Research, with lavish (and, hypocritically, usurious) funding from wealthy effective altruists. The firm makes big gains on complex arbitrage trades, but at one point it’s also losing half a million dollars a day. Within a few months, Alameda falls apart, and half of the senior staff leaves. A hazy picture of what became known as “the schism” has circulated in the effective-altruist community since then, but Lewis for the first time provides a detailed version of the story: with only a shoddy system to track the firm’s assets, about four million dollars of cryptocurrency went missing. Bankman-Fried didn’t worry too much about it, but his colleagues did; some of them thought that he’d perhaps stolen it, and they told other members of the community that Bankman-Fried was ethically bankrupt. If he could blithely lose track of four million dollars—money that was in theory earmarked to save thousands of lives—how could he possibly position himself as a movement steward? Lewis writes, “At least some of his fellow effective altruists aimed to bankrupt Sam, almost as a service to humanity, so that he might never be allowed to trade again.” Lewis writes, of this internecine struggle, that you might have reasonably assumed that the putative owner of money slated for donations wouldn’t matter: “You would be wrong: in their financial dealings with each other, the effective altruists were more ruthless than Russian oligarchs.” Many people, myself included, felt that even the sketchy lineaments of this story should have forced the E.A. movement to reckon with Bankman-Fried’s slipperiness sooner. And Bankman-Fried, in his relationships with his erstwhile colleagues, could be monstrous. In this as in basically all other instances, Lewis makes it clear that he acted like an asshole.

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