Robbing Peter to Pay Paul: the rise and fall of FTX and the joy of diminished capacity
This weekend, I fell down a long rabbit hole, reading about Sam Bankman-Field and the rise and fall of his company FTX, a business that meant nothing to me until it imploded last Friday.
A bit of background: Sam Bankman-Fried grew up in California. His parents are both professors at Stanford Law School. He attended MIT and graduated in 2014 with a degree in physics. Three years later, he started a small cryptocurrency company based first in California and later in Hong Kong, where regulation is less stringent than in the United States. What is crypto-currency? Essentially, it’s money used only digitally and “held” by a “de-centralized” entity rather than a traditional bank. Over the last few years, Bankman-Fried built FTX (short for “Futures Exchange”) into one of the world’s largest cryptocurrency trading platforms.
At the beginning of this year, Bankman-Fried raised millions of dollars in venture capital funds, valuing his company at nearly $32 billion. He sailed on yachts with millionaires, hosted parties in the Bahamas, lobbied congress for loosened restrictions around digital currency, and — it seems — engaged in a whole host of shady financial tactics that inevitably led to his company’s swift downfall.
On Friday, Mr. Bankman-Fried resigned as CEO and filed FTX for bankruptcy.
If you’re looking for specifics about cryptocurrency and how it works — I am not your girl. But I am fascinated with the rise and fall of celebrity, the “fake it until you make it” ethos of our current generation, and the serious implications of the lingering mantra from one Mark Zuckerberg — move fast and break things. Well, yes. I can agree with him on that. We are moving fast. And we are breaking so, so many things.
According to the Wall Street Journal, the FTX bankruptcy will likely wipe out billions in equity value. Real money invested by real people. For example, a friend of mine gave her nephew $100 in cryptocurrency for his birthday. As of Sunday, that initial $100 investment was worth about $26. The company used customer investments in FTX to cover liabilities and risky ventures in another company owned by Bankman-Field called Alameda. Essentially they were robbing Peter to pay Paul. And so, like a house of cards, the thing came tumbling down, never having had much structure to begin with.
So why does any of this matter?
First of all, it matters, because we are living in economically perilous times. After two years of pandemic-related global shutdowns, the world is now* experiencing rampant inflation, labor shortages, and rising interest rates. People all over the globe are feeling the heavy weight of paying for their basic needs — food, clothing, and shelter. In this context, Mr. Bankman-Field played fast and loose with ethics, bending the rules, stretching the limits — moving money from this to amplify that— and for what?
For his growth. His wealth. His reputation. His power. The adage proves true once again: Absolute power corrupts absolutely. In the name of building his influence, Sam Bankman-Field destroyed himself and others along the way. And sadly, this trend is not only limited to tech.
We’re moving too fast for government to regulate the pace of change. In fertility treatments. In Crspr genetic editing. In so-called “gender-affirming” care. And certainly in tech. Social media apps, built less than a decade ago, have left an indelible wound on an entire generation.
Where are the people who are willing to move slow and build things? Where are the wise, the honest, the humble? Where are the leaders of integrity? Where are the people who will steward their resources and not leverage them?
Prison time seems likely for Bankman-Field, and perhaps others in his circle. And they deserve whatever justice comes their way for fraud, embezzlement, and corruption. (I will never forget the time I heard Ken Burns say, as a guest on a podcast, that he looked forward to the day Facebook CEO Mark Zuckerberg is brought to justice in his own version of a “Nuremberg Trial.” ) No matter whether you relish or grieve Elon Musk’s recent Twitter takeover, the truth remains — these are companies led by fallible people. People just like you and me.
Bankman-Field became addicted to perpetual, relentless, undiminished growth. But we all, eventually, run into the brick wall of our own limitations. The capacity we had last week, last month, last year, doesn’t necessarily hold up over time. Perhaps the business you started fails. You can admit defeat, or you can stuff the scarecrow with straw and insist it’s a real man. Perhaps you’re exhausted. You can go to bed, or you can guzzle a Red Bull and push through the pain. Perhaps your children are sick and haven't been sleeping. You can walk around in a constant state of frustration and anxiety, or accept the gift of diminished capacity.
The joy of diminished capacity means admitting you can’t do or accomplish as much as you once imagined. The joy of diminished capacity means giving yourself permission to admit your own humanity. It means adopting the Pauline mantra, “when I am weak, then He is strong.”
Therefore I will boast all the more gladly about my weaknesses, so that Christ’s power may rest on me. That is why, for Christ’s sake, I delight in weaknesses, in insults, in hardships, in persecutions, in difficulties. For when I am weak, then I am strong. — 2 Corinthians 12:9-11
More often, though, I choose to rail against my diminished capacity rather than embrace it. All of us, in our own ways, strive to earn some ephemeral, invisible currency and then use that to pay off an old debt. The oldest debt. The one at the center of it all. The deep yearning, the God-sized hole, the leaky bucket at the bottom of our hearts. We all embezzle, spiritually speaking. We think our “achievements” — even our “righteous” achievements — will somehow hold up our house of cards, proving that we are good, or good enough, or at least not as bad as those other people.
The joy of the gospel is that it lets me off the hook of my own outsized expectations. I don’t have to grow. I don’t have to achieve. I can simply rest, knowing that none of those achievements would have lasted anyway.
After all, if a company worth $32 billion dollars last Thursday can be worth $0 on Friday, then what are we even chasing?
*an earlier version mistakenly had this word written as “not” — I most certainly know that we ARE experiencing inflation etc. Apologies for my error.
As Wendell Berry puts it in his poem The Country of Marriage, “The forest is mostly dark, its ways to be made anew day after day, the dark richer than the light and more blessed, provided we stay brave enough to keep on going in.”
You received this email because at some point in the past, you expressed interest or signed up for email updates. I hope the words bring a bit of encouragement to keep entering into the (mostly) dark forest we call life.
Recent Favorites:
BOOK:
The Signature of All Things by Elizabeth Gilbert. Yes, yes. This novel is written by the same woman who wrote “Eat, Pray, Love” but hear me out. It’s a sweeping historical novel about a British botanical explorer in the 1800s, and his daughter, Alma, who ends up being a brilliant, world-traveling spinster, on the search for the meaning of life. I downloaded the audiobook through the library app Libby, and have enjoyed listening in bits and pieces, while I do laundry, drive the kids to school, or go on a long run. Gilbert’s prose mesmerizes me!
PURCHASE:
Hajimari Flying Ball. If you’re looking to buy a Christmas present for your kid, niece, nephew, or grandchild — look no further than this insane contraption. We saw someone playing with one in our neighborhood and I immediately went home and tracked one down for Sam’s birthday. It’s been a hit. (And fun for adults too!)