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To me, SBF embodied the worst stereotypes about the Effective Altruism movement. The not-so-subtle air of I'm-smarter-than-thou, the hubris to think whatever th

To me, SBF embodied the worst stereotypes about the Effective Altruism movement. The not-so-subtle air of I'm-smarter-than-thou, the hubris to think whatever they have thought of haven't been thought and dismissed by others (probably for good reason), and a bull-headed focus on risk and return that can be exactly quantified, to the point of ignoring other, "softer" sides of the issue. Until I see stronger denouncements of SBF (and not just for getting caught, but for the scheming) from within the Effective Altruism community, I don't think I can take them quite seriously anymore. SBF isn't alone in this. In school, while interning for a competing hedge fund, I met a drove of Jane Street interns who thought exactly the same way, in terms of "EV" or expected value -- the mean outcome from a random event. For example, whenever we would go out for ice cream, they would try to flip a coin to see who pays, given the "expected cost" was same. This behavior is fine if you're a market maker betting 0.001% of your worth on a toss that you win 51% of the time, and I imagine this is why Jane Street tries to cultivate it. But unfortunately, in this hyperfocus on returns, they forgot that "risk"/"variance" exists, and sometimes flipping a coin will land you in such a deep hole that you can't continue to play the game long enough to dig yourself out of there.

Melting_Harps 4y ago
> within the Effective Altruism community, I don't think I can take them quite seriously anymore. Having been involved with environmental activism and Bitcoin stuff for over a decade you see these types show up every now and then, often just for photo-ops and a self-gratifying projection of themselves in whatever will satisfy thier own ego trip. Honestly, these types are one of the biggest impediments to progress in these movements, they're so disillusional and siphon off much needed capital into these projects that ultimately leave everyone who might have cared at one point entirely apathetic (like you) to the plights and causes because they got burned from one of them. I think true altruism is an incredibly rare virtue, and subsequently a much needed one in the World at that, but it's often from a source of genuine personal pain and suffering that allows you to recall and thus empathize with someone who is/has gone through similar difficulties you've been through. To that end, I find it impossible for SBF to truly have a sense of self-awareness to realize how toxic and blatantly counter-productive he is and will likely be remembered as in both EA and in The Crypto community. Karpales was persona non-grata for nearly decade for MTGOX, but at least he did a mea culpa and served time in prison and sadly had his personal life destroyed as a result of his scam. I fear SBF will not face much given his connections and involvement in US politics via donations as well as his family, and THAT shows the hypocrisy of these sorts of people.
c7b 4y ago
> I met a drove of Jane Street interns who thought exactly the same way, in terms of "EV" or expected value It's interesting that you say that. When I read the article claiming that a trader should be neutral between $50 and $100 with 50%, I saw that as an oversimplification for dramatic effect. But what you describe seems like they actually thought like that, which strikes me as bizarre. If you lose your entire budget, it doesn't matter that your winning probability was >50%, so you should always adjust the size of your bets to the size of your budget. While it practically doesn't matter, of course, when people on 6-digit salaries gamble over $10 ice cream, it makes a difference in principle (and the whole purpose of the exercise seems to have been to instil a principle). I'd have expected them to drill their interns on some variation of a Kelly criterion.
- polygamous_bat 4y ago
  While Kelly style analysis makes sense for investors like Buffet or Dalio, who bet a significant portions of their wealth on certain positions, for Jane Street it doesn't make much sense. That is because Jane Street makes most of their money in millions of really small trades either in market making, arbitraging, or front-running other trades every day. For these, every trade, profitable or not, is necessarily a miniscule portion of their capital. Good to remember that the business that blew up in SBF's face was Alameda the prop trading desk, and not FTX, the exchange and the market maker. Seems like he did learn his lessons in EV well, it just wasn't good enough for bets over a certain size.
  - c7b 4y ago
    Haha, well it seems that overlooking the ruin probability is exactly what was missing from both SBF's effective altruism 'life calculus', as well as the risk management in his fund. It appears that he really inhaled the EV thinking that he learnt at Jane Street and took it to the extreme - and the outcome was exactly what basic stochastic process theory would have predicted. That was really insightful, thanks for sharing that anecdote! The whole story would be worthy of a Greek tragedy - rise and fall of a kid blessed with an almost supernatural gift, with just a tiny yet catastrophic flaw - the proverbial Achilles heel.
huveja 4y ago
It sounds good in theory, but now let's imagine the following scenario, after Meta kicked me out and I also lost all my savings in FTX, I'm totally broke, and I desperately need $50 to pay for the room in the miserable motel I'm staying, otherwise that same day they are going to kick me out into the street. I go to one of the few friends I have left, and the guy, which is a little sadistic, offers to give me that $50 right now, or give me $100 depending on what comes out on the flip of a coin ..

Melting_Harps 4y ago

> within the Effective Altruism community, I don't think I can take them quite seriously anymore. Having been involved with environmental activism and Bitcoin stuff for over a decade you see these types show up every now and then, often just for photo-ops and a self-gratifying projection of themselves in whatever will satisfy thier own ego trip. Honestly, these types are one of the biggest impediments to progress in these movements, they're so disillusional and siphon off much needed capital into these projects that ultimately leave everyone who might have cared at one point entirely apathetic (like you) to the plights and causes because they got burned from one of them. I think true altruism is an incredibly rare virtue, and subsequently a much needed one in the World at that, but it's often from a source of genuine personal pain and suffering that allows you to recall and thus empathize with someone who is/has gone through similar difficulties you've been through. To that end, I find it impossible for SBF to truly have a sense of self-awareness to realize how toxic and blatantly counter-productive he is and will likely be remembered as in both EA and in The Crypto community. Karpales was persona non-grata for nearly decade for MTGOX, but at least he did a mea culpa and served time in prison and sadly had his personal life destroyed as a result of his scam. I fear SBF will not face much given his connections and involvement in US politics via donations as well as his family, and THAT shows the hypocrisy of these sorts of people.

c7b 4y ago

> I met a drove of Jane Street interns who thought exactly the same way, in terms of "EV" or expected value It's interesting that you say that. When I read the article claiming that a trader should be neutral between $50 and $100 with 50%, I saw that as an oversimplification for dramatic effect. But what you describe seems like they actually thought like that, which strikes me as bizarre. If you lose your entire budget, it doesn't matter that your winning probability was >50%, so you should always adjust the size of your bets to the size of your budget. While it practically doesn't matter, of course, when people on 6-digit salaries gamble over $10 ice cream, it makes a difference in principle (and the whole purpose of the exercise seems to have been to instil a principle). I'd have expected them to drill their interns on some variation of a Kelly criterion.

polygamous_bat 4y ago
While Kelly style analysis makes sense for investors like Buffet or Dalio, who bet a significant portions of their wealth on certain positions, for Jane Street it doesn't make much sense. That is because Jane Street makes most of their money in millions of really small trades either in market making, arbitraging, or front-running other trades every day. For these, every trade, profitable or not, is necessarily a miniscule portion of their capital. Good to remember that the business that blew up in SBF's face was Alameda the prop trading desk, and not FTX, the exchange and the market maker. Seems like he did learn his lessons in EV well, it just wasn't good enough for bets over a certain size.
- c7b 4y ago
  Haha, well it seems that overlooking the ruin probability is exactly what was missing from both SBF's effective altruism 'life calculus', as well as the risk management in his fund. It appears that he really inhaled the EV thinking that he learnt at Jane Street and took it to the extreme - and the outcome was exactly what basic stochastic process theory would have predicted. That was really insightful, thanks for sharing that anecdote! The whole story would be worthy of a Greek tragedy - rise and fall of a kid blessed with an almost supernatural gift, with just a tiny yet catastrophic flaw - the proverbial Achilles heel.

huveja 4y ago

It sounds good in theory, but now let's imagine the following scenario, after Meta kicked me out and I also lost all my savings in FTX, I'm totally broke, and I desperately need $50 to pay for the room in the miserable motel I'm staying, otherwise that same day they are going to kick me out into the street. I go to one of the few friends I have left, and the guy, which is a little sadistic, offers to give me that $50 right now, or give me $100 depending on what comes out on the flip of a coin ..