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What I don't get is why some of these guys just cash out when they're near the top. Guy was 29 and had some 20+ billion dollars to his name (supposedly). Leav

What I don't get is why some of these guys just cash out when they're near the top. Guy was 29 and had some 20+ billion dollars to his name (supposedly). Leave the trading firm to a few folks, keep a bit of equity to enjoy the continued success, and that's it! Just walk away, call it a day and enjoy your life. Same could be said for Zuck - except he had like 25 or 30 billion (not adjusted for inflation) at the same age. I just don't understand it. NINJA EDIT: changed the amount of money he was apparently worth. Wiki said it got to 28 billion.

shuckles 4y ago
Did you read the article? He didn't cash out for the same reason he left a job with guaranteed wealth at Jane Street: he doesn't think he has the same diminishing marginal utility for money that you do.
escapecharacter 4y ago
Maybe I’m in the wrong tax bracket but I’m fine walking away from anything once I have more than a billion dollars regardless of age.
jjulius 4y ago
Greed, power, narcissism, the list goes on. Not attributing any one of those specifically to any individual, but yeah.
- herodoturtle 4y ago
  Or ambition.
  - the-printer 4y ago
    Which is often synonymous with “Greed, power, narcism” when billions of dollars are at play.
NotYourLawyer 4y ago
Poor man wants to be rich. Rich man wants to be king.
pfortuny 4y ago
The will to power. It is a much stronger force than one reckons usually. And it is very difficult to be conscious of it in oneself.
ren_engineer 4y ago
dude was running a Ponzi scheme in this case, there was no walking away. There were like 3 people internally who knew about all this stuff behind the scenes. It was a full time job keeping everything hidden for this long
- the-printer 4y ago
  This is it in a nutshell. Maybe when a criminal enterprise is more “white-collar” than the usual, the truth behind the concept of being “in too deep” is overlooked.
tempsy 4y ago
His reported net worth was equity in his business. The idea of "cashing out" the entirety of your equity in a VC backed co as a founder is not exactly an option unless you're acquired.
- NickC25 4y ago
  I get that - but my hunch is that if VC firms were able to invest the amount that they did, he probably had the ability to sell more of his stake in the company if he wanted to. Granted, with what we know now, that does fit the definition of securities fraud.
  - tempsy 4y ago
    if you’re lucky you can do small secondaries but there’s no cashing out, quitting, and walking away to a beach somewhere after raising billions of dollars…it’s just not an option
    - adrr 4y ago
      They paid the WeWork founder $1.7B to step down. https://en.wikipedia.org/wiki/Adam_Neumann https://en.wikipedia.org/wiki/Adam_Neumann
- bluedevil2k 4y ago
  We’re all missing the big gotcha here - if he tried to sell out, the buyer would have done some DD and found the fraud as quick as Binance did. Best to keep quiet about your crimes.
CPLX 4y ago
You can’t walk away from a fraudulent balance sheet.
skulk 4y ago
Why don't you quit your (assumed comfy US tech) job and go retire in a low cost-of-living area? I know that it's not the same thing, but the answer might be similar.
- geraldcombs 4y ago
  I think you just answered the question yourself. There's a big difference between being able to retire to a low cost of living area and being able to retire to an any cost of living area.
- NickC25 4y ago
  I don't have a comfy US tech job, and never have, but I would love to. Closest I got was doing PM work for a startup in which I had significant equity (but ended up failing). Funny enough, YC doesn't even let me attend their job webinars! Truth is though - if I could ever achieve a payout of a few million or more, I'd call it a day, right on the fucking spot. Invest in long stocks and dividend stocks, and go live in a small home near a cold weather city. I grew up around billionaires, and they scare the shit out of me...no intention of becoming one.
anonporridge 4y ago
Why did Yvon Chouinard not actually give his company Patagonia to charity, but instead gave it to a non profit foundation that he and his family still totally control? Up to a certain point, more money doesn't make your life materially better. At that point, the game becomes entirely about power and influence.
- caminante 4y ago
  I debated the Patagonia altruist marketing play with friends. The consensus was that if you were the kids, you'd much rather have the post-tax cash in your bank account. :-)
  - based69 4y ago
    Whats more likely to result in your kids being upstanding members of society? 300 million cash in a bank account, or a job and board seat at a billion dollar charity for eternity and $20 million?
    - caminante 4y ago
      > 300 million cash in a bank account, or a job and board seat at a billion dollar charity for eternity and $20 million? And what is the PV of that board seat at the family controlled charity/business that wasn't affected by an inheritance tax?
  - anonporridge 4y ago
    You and your friends are likely broke in comparison to the Chouinards. It seems incredibly presumptuous to assume you know how the minds of children of billionaires work and what they aspire to have. This calls to mind a scene in the series "Succession" that I can't find now. The father and owner of the company is considering selling the company and cashing out, and his children, who have all been fighting for years to become his key successor, are up in arms about it, despite the fact that they would all become cash billionaires due to the shares in the company they already own. The gist is that having billions in cash effectively makes you a nobody compared to the person actually running a multi billion dollar company. As the leaders of a global media company, you're somebody important, compared to just some schmuck with a billion dollars. Then again, these characters are all have deep insecurity living in the shadow of their father, and he plays them all like a fiddle to keep them fighting each other for his approval.
nostromo 4y ago
I think it’s selection bias, because plenty of folks do cash out early. If Zuck had taken Yahoo’s offer to buy Facebook for $1B, neither you nor I would be talking about Facebook or Zuck at all right now. The only people that get to these insane levels of wealth are people who repeatedly let their bets ride, perhaps due to innately low risk aversion.
- misiti3780 4y ago
  if 330M people flip a coin 20 times in a row, someone will get close to 20 heads. that person might have been zuck. how much is talent and how much is luck, no one will even know.
  - SXX 4y ago
    There is something that we do know though. Those who dont flip coin at all will never get close to 20 heads. Ever.
    - MarcelOlsz 4y ago
      Why would I even want to flip a coin? I already have a bag full of pennies.
      - misiti3780 4y ago
        If you have an account in HN, something tells me you have flipped some coins.
        MarcelOlsz 4y ago
        And I lost every time.
        misiti3780 4y ago
        Keep flipping! you will eventually regress back to the mean.
myth_drannon 4y ago
Bernie Madoff also didn't quit at the peak.
pastor_bob 4y ago
Many people cash out at stages before this and don't make it to his level. You don't hear about them because they cashed out. Above a certain number, it's really irrelevant. The drive (or greed, etc) keeps them going. Not to mention, money makes your influence increase, and the idea you can start influencing things like politics on a national scale becomes very enticing.
alangibson 4y ago
The qualities that get them to that point are the same qualities that make it impossible for them to stop.
TuringNYC 4y ago
>> What I don't get is why some of these guys just cash out when they're near the top. Because you dont know where the "top" is. One could argue the top was 1M. 5M. 100M. 1B.
- NickC25 4y ago
  Right - I get that, and you make a fair (and valid!) point. Nobody knows where the top is. It's all hypothetical. But my point is that when you're seeing hypergrowth in your company, you probably have an idea of what it's worth or what level you're happy walking away at. Example: I currently run a small side-hustle culinary business while I look for a full-time tech gig. It doesn't make me much money but I enjoy doing it and it helps put food on the table. If someone came up and offered me a million dollars to walk away, I'd take it without blinking. If Yahoo offered Zuck 10 billion way back when instead of 1 billion, I have a feeling he would have walked away, too.
vagab0nd 4y ago
When I think about it rationally, the answers are pretty obvious to me. Either he wanted something other than money (winning, fame, etc.), or he was addicted and wanted more money. I don't have billions of dollars, but if I was put in that position, I could imagine myself doing the same, maybe. (not the fraud part, but continue working)
jonas21 4y ago
> Just walk away, call it a day and enjoy your life. Presumably, they're already doing the thing they enjoy most in life. Cashing out and lying around on a beach or whatever would be extremely disappointing.
skrebbel 4y ago
I don’t know about SBF, who to my limited understanding is just a run of the mill crypto scammer so should’ve gotten out while he was ahead, but with Zuck I’m pretty sure that it’s simply not only about the money for him, but also about making cool stuff and having an impact.
HFguy 4y ago
My view, having watched some super wealthy guys up close, is the formula to make a lot of money in one life time is: (1) Be skillful at whatever you do + (2) Take a lot of risk Keep in mind there is a survivorship bias at work. So the really rich guys, they usually do have considerable skill and ability. But they also have taken big risk after big risk and it has, more or less, always paid off for them. It is all they know...the coin flips going their way. So they are some combo of they are pre-wired to take big risks and/or have been conditioned by experience that the risks just always pay off for them. So they will just keep taking big risks time after time. There is no "take the money off the table". The question I always have is it more (A) pre-wired or (B) Good luck has conditioned them over and over. Don't know. As you point out, you see not just SBF doing this, but Zuck and Elon and the list goes on...
- tsimionescu 4y ago
  You forgot the most successful strategy for making enormous amounts of money in one life: start with enormous amounts of money, and don't be entirely completely idiotically incompetent. Making a billion dollars is a lot easier if you can start with mommy's billion, or even her hundred million.
  - robocat 4y ago
    Everything I have seen shows the strategy is “start with connections”. The money is less important (multiple bankruptee becomes prez, Gates used IBM connections, Elizabeth Holmes got investors through family connections, yada yada yada). There are lots of billionaires that started from upper-middle-class wealth. And other examples of children given huge money that blow it all.
nullc 4y ago
> (supposedly) Key word. But not it looks like most of that wealth was fictional-- just marking up highly illiquid premined shitcoins.
donsupreme 4y ago
$20B with asset. How much of that asset he holds that he can cash out without systemic correction, maybe $1B? Especially with a lot of his worth tied to his own token FTT, which has paper thin liquidity.
keewee7 4y ago
He was born on the Stanford campus to parents who are Stanford professors. His personal criteria for success is probably something else than just becoming yet another rich tech guy.
- vkou 4y ago
  It was also certainly not becoming the Madoff of crypto.
fshbbdssbbgdd 4y ago
SBF wealth probably would have vaporized if he tried to sell. In recent days there’s been evidence that a big portion of SBF’s net worth was tied up in coins SBF issued. To the extent that his companies possessed other assets, many of them were purchased with loans collateralized by SBF coins. We just saw what happened when confidence in FTX was threatened. The whole thing came tumbling down. Selling out would likely have had the same outcome.
- readthenotes1 4y ago
  Well, what we saw was the guy stealing $8B to keep the plates spinning. Hope he goes to jail.
deleted 4y ago
[deleted]
chrchang523 4y ago
In SBF’s case, I think there was actually an academic failure: there was something very important that he should have been taught, but wasn’t. https://mobile.twitter.com/SBF_FTX/status/1337250704075833347 https://mobile.twitter.com/SBF_FTX/status/133725070407583334... https://twitter.com/SBF_FTX/status/1299553547596431360 https://twitter.com/SBF_FTX/status/1299553547596431360 These are excellent topics for classroom discussion. What I believe should have followed is a stronger justification for using something like the Kelly criterion despite a personal near-linear utility function, on the basis that e.g. not going all the way down to zero asymmetrically preserves access to future investment opportunities, and similar grounds. I think plenty of people intuitively understand this. But instead, nobody was able to explain to him why he couldn’t throw out the book on risk management, and he acted accordingly.
- robocat 4y ago
  SBF discusses his objections to the assumptions for the Kelly Criterion here: https://twitter.com/sbf_ftx/status/1334310313710157829 https://twitter.com/sbf_ftx/status/1334310313710157829 1) it's way too conservative for many people 2) it contains strong assumptions about infinitely repeated identical bets that you can't have an adaptive strategy with, none of which describe the real world 3) it's scale-invariant in a way that is inconsistent with its sublinearity “Rationalisation” is a favourite word of mine, because it is so irrational. I try not to underestimate anyones capacity for self-deception (including my own). Sam surely deeply understood the Kelly Criterion, and risk management, yet he apparently kept doubling down, like https://en.wikipedia.org/wiki/St._Petersburg_paradox https://en.wikipedia.org/wiki/St._Petersburg_paradox https://www.sequoiacap.com/article/sam-bankman-fried-spotlight/ https://www.sequoiacap.com/article/sam-bankman-fried-spotlig... says: Here, SBF realized, was the rub: When he applied this principle to his own life, he came up short. There was little chance he’d get himself fired from Jane Street. Thus the decision to stick with Jane was a risk-averse preference. It was the logical equivalent of being offered a choice between $50 and 50 percent of $100, and saying, “Give me President Grant.” SBF was risk-neutral on behalf of Jane Street, but not, he realized, for his own life. To be fully rational about maximizing his income on behalf of the poor, he should apply his trading principles across the board. He had to find a risk-neutral career path—which, if we strip away the trader-jargon, actually means he felt he needed to take on a lot more risk in the hopes of becoming part of the global elite. The math couldn’t be clearer. Very high risk multiplied by dynastic wealth trumps low risk multiplied by mere rich-guy wealth. To do the most good for the world, SBF needed to find a path on which he’d be a coin toss away from going totally bust. Although it is weird the author of the article uses an example of taking both bets, yet Sam throws away one bet (working for Jane Street). Asides on Effective Altruism investing: https://forum.effectivealtruism.org/posts/9pktesiW2WPEFNvCQ/uncorrelated-bets-an-easy-to-understand-and-very-important https://forum.effectivealtruism.org/posts/9pktesiW2WPEFNvCQ/... https://forum.effectivealtruism.org/posts/CsSdjZF7wyNuMvSdy/is-ea-over-invested-in-crypto https://forum.effectivealtruism.org/posts/CsSdjZF7wyNuMvSdy/...
anonu 4y ago
He needed Elon money. Elon questioned his wealth and SBF was looking to add a few zeros. Pure Greed.
renewiltord 4y ago
Because the guy who would quit there would quit earlier.
ptero 4y ago
I feel the same way. He probably could not have sold a large portion of it without trashing its value, but he surely could have sold a few hundred millions. And, should the system later implode, he could have easily disassociated himself from this fiasco: "those things would not have happened if I were still running things; I lost a lot of billions; I am a victim of this fiasco, just like you are." In politics, too, very few leaders manage to leave at the right time: while they are near the peak of success, which looks so much better later on...
bmitc 4y ago
I have always wondered the same. Others say it’s selection bias, but I think it’s more of the personality type of those that don’t cash out. I think there’s a lot of narcissism, ego, or maybe even just plain naivety involved. If it was me, I would cash out and then do some combination of foundation/volunteering work, education, relaxing, and focusing on some of my actual passions.
deleted 4y ago
[deleted]
Ebree 4y ago
I believe that founder leaving created a big missing out fear in founder and lowers value of shares automatically. When get all from first business it becomes part of you and your identity. You start asking yourself if you are able to come back to the same point with a different idea, if you will make any good at different path and if you not miss out on ability to forever improve product "only you know best in world". Nobody wants to resign from position of best in the world at something & it highjacks you mentally. The most based thing to do would be leaving company, cashing out and building a better alternative. But nobody that crazy except few guys like Nodejs, Whatsup guys(if not mistaken), lately Jack. But sometimes it's forced by circumstances like founder(s) of vk & Telegram. And you have these serial pump and leave schemes builders as the guy who built Bitshares, Steen, EOS. It maybe shows that only keeping distance to own creation you keep ability to see it critically, notice flaws & point where you can't improve it without fundamentally redesigning it from scratch. People are servants of their goal, if they can't imagine better extension or replacement of the goal they get stuck because only alternative is not having a good goal & being lost. People are scared if being lost more that of death. Maybe both cases are somehow similar.

shuckles 4y ago

Did you read the article? He didn't cash out for the same reason he left a job with guaranteed wealth at Jane Street: he doesn't think he has the same diminishing marginal utility for money that you do.

escapecharacter 4y ago

Maybe I’m in the wrong tax bracket but I’m fine walking away from anything once I have more than a billion dollars regardless of age.

jjulius 4y ago

Greed, power, narcissism, the list goes on. Not attributing any one of those specifically to any individual, but yeah.

herodoturtle 4y ago
Or ambition.
- the-printer 4y ago
  Which is often synonymous with “Greed, power, narcism” when billions of dollars are at play.

NotYourLawyer 4y ago

Poor man wants to be rich. Rich man wants to be king.

pfortuny 4y ago

The will to power. It is a much stronger force than one reckons usually. And it is very difficult to be conscious of it in oneself.

ren_engineer 4y ago

dude was running a Ponzi scheme in this case, there was no walking away. There were like 3 people internally who knew about all this stuff behind the scenes. It was a full time job keeping everything hidden for this long

the-printer 4y ago
This is it in a nutshell. Maybe when a criminal enterprise is more “white-collar” than the usual, the truth behind the concept of being “in too deep” is overlooked.

tempsy 4y ago

His reported net worth was equity in his business. The idea of "cashing out" the entirety of your equity in a VC backed co as a founder is not exactly an option unless you're acquired.

NickC25 4y ago
I get that - but my hunch is that if VC firms were able to invest the amount that they did, he probably had the ability to sell more of his stake in the company if he wanted to. Granted, with what we know now, that does fit the definition of securities fraud.
- tempsy 4y ago
  if you’re lucky you can do small secondaries but there’s no cashing out, quitting, and walking away to a beach somewhere after raising billions of dollars…it’s just not an option
  - adrr 4y ago
    They paid the WeWork founder $1.7B to step down. https://en.wikipedia.org/wiki/Adam_Neumann https://en.wikipedia.org/wiki/Adam_Neumann
bluedevil2k 4y ago
We’re all missing the big gotcha here - if he tried to sell out, the buyer would have done some DD and found the fraud as quick as Binance did. Best to keep quiet about your crimes.

CPLX 4y ago

You can’t walk away from a fraudulent balance sheet.

skulk 4y ago

Why don't you quit your (assumed comfy US tech) job and go retire in a low cost-of-living area? I know that it's not the same thing, but the answer might be similar.

geraldcombs 4y ago
I think you just answered the question yourself. There's a big difference between being able to retire to a low cost of living area and being able to retire to an any cost of living area.
NickC25 4y ago
I don't have a comfy US tech job, and never have, but I would love to. Closest I got was doing PM work for a startup in which I had significant equity (but ended up failing). Funny enough, YC doesn't even let me attend their job webinars! Truth is though - if I could ever achieve a payout of a few million or more, I'd call it a day, right on the fucking spot. Invest in long stocks and dividend stocks, and go live in a small home near a cold weather city. I grew up around billionaires, and they scare the shit out of me...no intention of becoming one.

anonporridge 4y ago

Why did Yvon Chouinard not actually give his company Patagonia to charity, but instead gave it to a non profit foundation that he and his family still totally control? Up to a certain point, more money doesn't make your life materially better. At that point, the game becomes entirely about power and influence.

caminante 4y ago
I debated the Patagonia altruist marketing play with friends. The consensus was that if you were the kids, you'd much rather have the post-tax cash in your bank account. :-)
- based69 4y ago
  Whats more likely to result in your kids being upstanding members of society? 300 million cash in a bank account, or a job and board seat at a billion dollar charity for eternity and $20 million?
  - caminante 4y ago
    > 300 million cash in a bank account, or a job and board seat at a billion dollar charity for eternity and $20 million? And what is the PV of that board seat at the family controlled charity/business that wasn't affected by an inheritance tax?
- anonporridge 4y ago
  You and your friends are likely broke in comparison to the Chouinards. It seems incredibly presumptuous to assume you know how the minds of children of billionaires work and what they aspire to have. This calls to mind a scene in the series "Succession" that I can't find now. The father and owner of the company is considering selling the company and cashing out, and his children, who have all been fighting for years to become his key successor, are up in arms about it, despite the fact that they would all become cash billionaires due to the shares in the company they already own. The gist is that having billions in cash effectively makes you a nobody compared to the person actually running a multi billion dollar company. As the leaders of a global media company, you're somebody important, compared to just some schmuck with a billion dollars. Then again, these characters are all have deep insecurity living in the shadow of their father, and he plays them all like a fiddle to keep them fighting each other for his approval.

nostromo 4y ago

I think it’s selection bias, because plenty of folks do cash out early. If Zuck had taken Yahoo’s offer to buy Facebook for $1B, neither you nor I would be talking about Facebook or Zuck at all right now. The only people that get to these insane levels of wealth are people who repeatedly let their bets ride, perhaps due to innately low risk aversion.

misiti3780 4y ago
if 330M people flip a coin 20 times in a row, someone will get close to 20 heads. that person might have been zuck. how much is talent and how much is luck, no one will even know.
- SXX 4y ago
  There is something that we do know though. Those who dont flip coin at all will never get close to 20 heads. Ever.
  - MarcelOlsz 4y ago
    Why would I even want to flip a coin? I already have a bag full of pennies.
    - misiti3780 4y ago
      If you have an account in HN, something tells me you have flipped some coins.
      - MarcelOlsz 4y ago
        And I lost every time.
        misiti3780 4y ago
        Keep flipping! you will eventually regress back to the mean.

myth_drannon 4y ago

Bernie Madoff also didn't quit at the peak.

pastor_bob 4y ago

Many people cash out at stages before this and don't make it to his level. You don't hear about them because they cashed out. Above a certain number, it's really irrelevant. The drive (or greed, etc) keeps them going. Not to mention, money makes your influence increase, and the idea you can start influencing things like politics on a national scale becomes very enticing.

alangibson 4y ago

The qualities that get them to that point are the same qualities that make it impossible for them to stop.

TuringNYC 4y ago

>> What I don't get is why some of these guys just cash out when they're near the top. Because you dont know where the "top" is. One could argue the top was 1M. 5M. 100M. 1B.

NickC25 4y ago
Right - I get that, and you make a fair (and valid!) point. Nobody knows where the top is. It's all hypothetical. But my point is that when you're seeing hypergrowth in your company, you probably have an idea of what it's worth or what level you're happy walking away at. Example: I currently run a small side-hustle culinary business while I look for a full-time tech gig. It doesn't make me much money but I enjoy doing it and it helps put food on the table. If someone came up and offered me a million dollars to walk away, I'd take it without blinking. If Yahoo offered Zuck 10 billion way back when instead of 1 billion, I have a feeling he would have walked away, too.

vagab0nd 4y ago

When I think about it rationally, the answers are pretty obvious to me. Either he wanted something other than money (winning, fame, etc.), or he was addicted and wanted more money. I don't have billions of dollars, but if I was put in that position, I could imagine myself doing the same, maybe. (not the fraud part, but continue working)

jonas21 4y ago

> Just walk away, call it a day and enjoy your life. Presumably, they're already doing the thing they enjoy most in life. Cashing out and lying around on a beach or whatever would be extremely disappointing.

skrebbel 4y ago

I don’t know about SBF, who to my limited understanding is just a run of the mill crypto scammer so should’ve gotten out while he was ahead, but with Zuck I’m pretty sure that it’s simply not only about the money for him, but also about making cool stuff and having an impact.

HFguy 4y ago

My view, having watched some super wealthy guys up close, is the formula to make a lot of money in one life time is: (1) Be skillful at whatever you do + (2) Take a lot of risk Keep in mind there is a survivorship bias at work. So the really rich guys, they usually do have considerable skill and ability. But they also have taken big risk after big risk and it has, more or less, always paid off for them. It is all they know...the coin flips going their way. So they are some combo of they are pre-wired to take big risks and/or have been conditioned by experience that the risks just always pay off for them. So they will just keep taking big risks time after time. There is no "take the money off the table". The question I always have is it more (A) pre-wired or (B) Good luck has conditioned them over and over. Don't know. As you point out, you see not just SBF doing this, but Zuck and Elon and the list goes on...

tsimionescu 4y ago
You forgot the most successful strategy for making enormous amounts of money in one life: start with enormous amounts of money, and don't be entirely completely idiotically incompetent. Making a billion dollars is a lot easier if you can start with mommy's billion, or even her hundred million.
- robocat 4y ago
  Everything I have seen shows the strategy is “start with connections”. The money is less important (multiple bankruptee becomes prez, Gates used IBM connections, Elizabeth Holmes got investors through family connections, yada yada yada). There are lots of billionaires that started from upper-middle-class wealth. And other examples of children given huge money that blow it all.

nullc 4y ago

> (supposedly) Key word. But not it looks like most of that wealth was fictional-- just marking up highly illiquid premined shitcoins.

donsupreme 4y ago

$20B with asset. How much of that asset he holds that he can cash out without systemic correction, maybe $1B? Especially with a lot of his worth tied to his own token FTT, which has paper thin liquidity.

keewee7 4y ago

He was born on the Stanford campus to parents who are Stanford professors. His personal criteria for success is probably something else than just becoming yet another rich tech guy.

vkou 4y ago
It was also certainly not becoming the Madoff of crypto.

fshbbdssbbgdd 4y ago

SBF wealth probably would have vaporized if he tried to sell. In recent days there’s been evidence that a big portion of SBF’s net worth was tied up in coins SBF issued. To the extent that his companies possessed other assets, many of them were purchased with loans collateralized by SBF coins. We just saw what happened when confidence in FTX was threatened. The whole thing came tumbling down. Selling out would likely have had the same outcome.

readthenotes1 4y ago
Well, what we saw was the guy stealing $8B to keep the plates spinning. Hope he goes to jail.

deleted 4y ago

[deleted]

chrchang523 4y ago

In SBF’s case, I think there was actually an academic failure: there was something very important that he should have been taught, but wasn’t. https://mobile.twitter.com/SBF_FTX/status/1337250704075833347 https://mobile.twitter.com/SBF_FTX/status/133725070407583334... https://twitter.com/SBF_FTX/status/1299553547596431360 https://twitter.com/SBF_FTX/status/1299553547596431360 These are excellent topics for classroom discussion. What I believe should have followed is a stronger justification for using something like the Kelly criterion despite a personal near-linear utility function, on the basis that e.g. not going all the way down to zero asymmetrically preserves access to future investment opportunities, and similar grounds. I think plenty of people intuitively understand this. But instead, nobody was able to explain to him why he couldn’t throw out the book on risk management, and he acted accordingly.

robocat 4y ago
SBF discusses his objections to the assumptions for the Kelly Criterion here: https://twitter.com/sbf_ftx/status/1334310313710157829 https://twitter.com/sbf_ftx/status/1334310313710157829 1) it's way too conservative for many people 2) it contains strong assumptions about infinitely repeated identical bets that you can't have an adaptive strategy with, none of which describe the real world 3) it's scale-invariant in a way that is inconsistent with its sublinearity “Rationalisation” is a favourite word of mine, because it is so irrational. I try not to underestimate anyones capacity for self-deception (including my own). Sam surely deeply understood the Kelly Criterion, and risk management, yet he apparently kept doubling down, like https://en.wikipedia.org/wiki/St._Petersburg_paradox https://en.wikipedia.org/wiki/St._Petersburg_paradox https://www.sequoiacap.com/article/sam-bankman-fried-spotlight/ https://www.sequoiacap.com/article/sam-bankman-fried-spotlig... says: Here, SBF realized, was the rub: When he applied this principle to his own life, he came up short. There was little chance he’d get himself fired from Jane Street. Thus the decision to stick with Jane was a risk-averse preference. It was the logical equivalent of being offered a choice between $50 and 50 percent of $100, and saying, “Give me President Grant.” SBF was risk-neutral on behalf of Jane Street, but not, he realized, for his own life. To be fully rational about maximizing his income on behalf of the poor, he should apply his trading principles across the board. He had to find a risk-neutral career path—which, if we strip away the trader-jargon, actually means he felt he needed to take on a lot more risk in the hopes of becoming part of the global elite. The math couldn’t be clearer. Very high risk multiplied by dynastic wealth trumps low risk multiplied by mere rich-guy wealth. To do the most good for the world, SBF needed to find a path on which he’d be a coin toss away from going totally bust. Although it is weird the author of the article uses an example of taking both bets, yet Sam throws away one bet (working for Jane Street). Asides on Effective Altruism investing: https://forum.effectivealtruism.org/posts/9pktesiW2WPEFNvCQ/uncorrelated-bets-an-easy-to-understand-and-very-important https://forum.effectivealtruism.org/posts/9pktesiW2WPEFNvCQ/... https://forum.effectivealtruism.org/posts/CsSdjZF7wyNuMvSdy/is-ea-over-invested-in-crypto https://forum.effectivealtruism.org/posts/CsSdjZF7wyNuMvSdy/...

anonu 4y ago

He needed Elon money. Elon questioned his wealth and SBF was looking to add a few zeros. Pure Greed.

renewiltord 4y ago

Because the guy who would quit there would quit earlier.

ptero 4y ago

I feel the same way. He probably could not have sold a large portion of it without trashing its value, but he surely could have sold a few hundred millions. And, should the system later implode, he could have easily disassociated himself from this fiasco: "those things would not have happened if I were still running things; I lost a lot of billions; I am a victim of this fiasco, just like you are." In politics, too, very few leaders manage to leave at the right time: while they are near the peak of success, which looks so much better later on...

bmitc 4y ago

I have always wondered the same. Others say it’s selection bias, but I think it’s more of the personality type of those that don’t cash out. I think there’s a lot of narcissism, ego, or maybe even just plain naivety involved. If it was me, I would cash out and then do some combination of foundation/volunteering work, education, relaxing, and focusing on some of my actual passions.

deleted 4y ago

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Ebree 4y ago

I believe that founder leaving created a big missing out fear in founder and lowers value of shares automatically. When get all from first business it becomes part of you and your identity. You start asking yourself if you are able to come back to the same point with a different idea, if you will make any good at different path and if you not miss out on ability to forever improve product "only you know best in world". Nobody wants to resign from position of best in the world at something & it highjacks you mentally. The most based thing to do would be leaving company, cashing out and building a better alternative. But nobody that crazy except few guys like Nodejs, Whatsup guys(if not mistaken), lately Jack. But sometimes it's forced by circumstances like founder(s) of vk & Telegram. And you have these serial pump and leave schemes builders as the guy who built Bitshares, Steen, EOS. It maybe shows that only keeping distance to own creation you keep ability to see it critically, notice flaws & point where you can't improve it without fundamentally redesigning it from scratch. People are servants of their goal, if they can't imagine better extension or replacement of the goal they get stuck because only alternative is not having a good goal & being lost. People are scared if being lost more that of death. Maybe both cases are somehow similar.