"Risk Master" SBF: What kind of personality enables SBF to dominate a company valued at $18 billion?
SBF: A CEO who has a clear understanding of risk but dares to hit the gas.
Source: The Generalist
Compiled by: Xiyu, 8btc
The CEO of FTX is a rare executive.
FTX will become one of the most influential companies of the next decade. This cryptocurrency exchange has risen to fame in just over two years, achieving a valuation of $18 billion. This has been accomplished through a combination of rapid growth, cautious aggression, product innovation, and a unique culture. In the "FTX Trilogy," we will unveil the veil over its helmsman, the company itself, and its future. This article is the first part.
Sam Bankman-Fried (hereafter referred to as SBF) is a master of risk.
Like a few others, this CEO of FTX demonstrates an understanding of the level of danger and the ability to bend it to his will. Only the world's outstanding investors and founders—like Warren Buffett and Steve Jobs—can consistently exhibit such talent. While SBF has yet to prove his sustainability in this regard, his early performance suggests he is a rare genius.
This is just one of the reasons SBF is suited for the role of a cryptocurrency exchange leader and founder of one of the most influential investment firms. At the same time, SBF combines the judicial wisdom of a creative regulator, the intuition of an elite trader, and more.
This series has contributed to one of the most impressive entrepreneurial experiences in modern memory. In his first three years leading FTX, SBF has moved forward at an extraordinary pace while successfully balancing risk, akin to riding a Harley on a tightrope high above the ground.
Of course, the company has not crossed the chasm. Few other industries face the regulatory risks that the crypto industry does, not to mention the speed of change. But with SBF, the company has an ideal leader: a CEO with a clear understanding of risk who dares to hit the gas, with an understanding of risk that is almost rare.
This may be an added benefit; in his insomnia and traits, he is a fitting embodiment of the crypto market he operates in.
Today, in Part 1 of the FTX Trilogy, we will outline SBF's growth story before delving into his thoughts.
SBF's Growth
Birth
Sam Bankman-Fried (SBF) was born on March 6, 1992, in Santa Clara County, California. SBF is the son of two law professors at Stanford University, Barbara Fried and Joseph Bankman, and grew up in a highly educated environment. This had a significant impact on his later thinking, which we will continue to discuss.
In 2010, SBF was admitted to the physics department at MIT. As he put it, he arrived there "a bit like a math nerd." In his early years, he considered pursuing an academic career, wanting to become a math professor. After realizing he had little enjoyment in formal research, he broadened his horizons. Specifically, he sought out things that suited his skills and were worth his effort:
One thing I did know was that I wanted to know how to have the most positive impact on the world. I had studied utilitarianism for a long time and recently started looking into effective altruism, which is basically a movement… you try to figure out how to affect the world, try to quantify things, and try to find out what the most effective ways are…
I had tried a lot of possible careers, almost everywhere. [I] talked to some people, and basically, they said, "You can work for these charities or organizations you think are good, or you can donate to them. Frankly, considering your strengths and weaknesses, maybe what you donate to them is more than what you could contribute by working for them directly." So I thought about it, [and also thought] that sounded like a very reasonable argument.
SBF firmly believed that accumulating a substantial salary and redirecting it to charity was the best way for him to gain influence, so he interned at Jane Street Capital during the summer of his junior year. Several friends had interned there before and said it was "not bad."
Founded in 1999, Jane Street has grown to become one of the largest and most respected quantitative trading firms in the world. It has maintained this reputation and scale: in 2020, the firm traded $17 trillion in securities.
The enjoyable summer job led SBF to a full-time position after graduating in 2014. It turned out to be a good fit. SBF reveled in being surrounded by a group of "nerds" dedicated to proposing and executing sharp trading ideas. He focused on international ETFs, a somewhat exotic style that foreshadowed some of his later more notable work in the Asian crypto market.
Although he described Jane Street as an excellent employer, after three and a half years, the young financier felt it was time to build something of his own. He recalled his reasoning at the time:
[I was thinking] there are a lot of things in life that I want to try. I don't know what will ultimately be the right thing. But at least one of those might go very well.
Alameda
No matter how optimistic he was, even SBF must have been surprised by the scale and speed of his success. After leaving Jane Street in 2017, he took time to think about potential opportunities. Attracted by the cryptocurrency craze sweeping the market at the end of that year, he turned his attention to the emerging ecosystem.
As he began to study the market, SBF's trading intuition began to rev up:
[Cryptocurrency] has a lot of characteristics that could make it a very inefficient system, and there is a huge demand for liquidity. Basically, it’s: a huge demand suddenly appears, growing very rapidly, a lot of volume, a lot of retail, and not much time to build institutions. Not much time to build liquidity…
It felt like something that could likely have very large quantity and price discrepancies.
When SBF realized the arbitrage opportunities between the U.S. and Asian crypto markets, this interest turned into an obsession. Due to demand differences, currencies like Bitcoin were trading at much higher prices in South Korea. This so-called "kimchi premium" sometimes reached 50%, which seemed like a once-in-a-lifetime opportunity.
In theory, at least, investors could buy Bitcoin on a U.S. exchange for $5,000 and then immediately flip it in Korea for $7,500.
As others discovered this inefficiency and tried to exploit it, SBF quickly recognized its limitations. Since the Korean won is a restricted currency, the size of the opportunity was limited. You could certainly make money, but redeploying hundreds of millions was not feasible. He was looking for something bigger.
While less conspicuous, SBF realized that the Japanese market shared similar characteristics with the Korean market. The net buying volume of Bitcoin was high, leading to a domestic exchange premium of 10-15%. Crucially, the yen is not a restricted currency, allowing for real money operations. This did not mean it was easy—it required a complex intermediary network that "looked like money laundering."
Based on SBF Odd lot interview
Seeing the opportunity to earn "10% every working day" by buying Bitcoin in the U.S. and selling it in Japan, SBF quickly took action. He raised funds to co-found Alameda Research, a quantitative trading firm, with former Google engineer and MIT alumnus Gary Wang and Nishad Singh, who had just graduated from the University of California, Berkeley, and had known SBF since high school. Essentially, this was the crypto version of Jane Street.
The profits from Japanese arbitrage were as SBF had imagined. With $200 million in funding, Alameda deployed and redeployed this capital in the Bitcoin market, earning 10% or $20 million daily.
However, SBF was not content to just calculate his bonuses and walk away. About a year after founding Alameda, he and his team began to consider a more significant opportunity: building a cryptocurrency exchange.
SBF believed that the exchanges at the time were not professional enough. While operating Alameda, he began to realize how much room for improvement existed in the underdeveloped crypto world. In fact, despite the promotions that Coinbase and others might have been doing at the time, true institutional-level trading still had a long way to go, especially for those interested in more complex securities.
For example, BitMEX offered derivatives trading, but like many other products, it was prone to outages and other performance issues. With their practical experience, SBF believed the Alameda team could create an exchange for professional investors like themselves.
FTX
At the end of 2018, SBF, Wang, and Singh began working on FTX, an exchange "built by traders, for traders."
However, there was a problem: the U.S. was an unfavorable environment for establishing a crypto derivatives exchange. Domestic regulators were skeptical of the emerging asset class, especially regarding more speculative investments. For example, the U.S. Securities and Exchange Commission (SEC) reasonably curtailed the ICO craze in early 2018 and warned that it would closely monitor exchanges throughout the year.
As the team developed their "attack plan," SBF made the decision: FTX would be established in Antigua and Barbuda.
However, this did not seem to slow down development. In May 2019, FTX officially opened for trading. Over the next two years, it grew into a company valued at $18 billion and became one of the most popular exchanges in the world.
While this largely depended on the product itself and the company's strategy, SBF's role cannot be underestimated. To understand what FTX is and what it might become, we need to not only learn about its founder's biography but also try to understand what truly resonates with him.
Understanding the Man
A Simple Analysis
Writing a profile has some almost unreasonable aspects. It not only requires the author to observe the subject rigorously—breathlessly writing down every exciting phrase, closely listening to every previous interview—but it also invites a kind of meddling that can sometimes intersect with profound understanding. How much can we glean from a brief conversation? How much curiosity is reasonable upon first meeting? What insights can we gain from the sediment of life? Are old tweets, resilient CNBC segments, long podcasts, and surprising poetry of any value?
The purpose only partially justifies the means.
SBF is a very approachable and friendly executive—after chatting on Twitter for a few minutes, we arranged a phone call. He was generous with both time and information. Conversely, it acknowledges that previous reports have sketched out his story and set the narrative. Every article discussing this person goes through the same three steps: He is young and very rich! He sleeps on beanbags in the office! He cares about the world!
These are either true or seem to be true. Predictably, we will talk about them. But beneath (and beyond) these descriptions of SBF lies a vast expanse. A person with a profound intellectual and emotional life, difficult to excavate even for those close to him.
I have done my best to play the "peeping Tom." But I have no explicit explanations, no magical keys to unlock SBF's mind. Just trying to understand him, no matter how flawed that task may be. In particular, I want to investigate four traits that I believe influence his character:
Chaotic but good moral alliance
Rapid processing speed
Skepticism of conventional wisdom
Rare ability to switch perspectives
I will focus on assessing the trade-offs of these traits and their advantages.
Chaotic but Good Moral Alliance
Given his interest in fantasy games like League of Legends, I have reason to believe that at some point in his life, SBF played Dungeons & Dragons. For those who have not spent an afternoon, evening, and night in a role-playing game, the basic gameplay involves creating a character and then undertaking quests with other members.
When designing a character, players must choose a race (like human or elf), a class (thief or wizard), and an alignment. This final decision requires participants to determine their character's moral and ethical views along two axes: lawful to chaotic, evil to good. The options are as follows:
Characters like Captain America are typical examples of lawful good alignment. He follows the rules and is driven by charity. In contrast, characters like the Joker are examples of chaotic evil. He just wants to watch the world burn.
SBF may be the most chaotic good founder on the planet. It is clear that, at least in some ways, he is driven by altruism. But the way he runs FTX indicates his willingness to act quickly within the boundaries.
Characters like Captain America are typical examples of lawful good alignment. He follows the rules and is driven by charity. In contrast, characters like the Joker are examples of chaotic evil. He just wants to watch the world burn.
SBF may be the most chaotic good founder on the planet. It is clear that, at least in some ways, he is driven by altruism. But the way he runs FTX indicates his willingness to act quickly within the boundaries.
Let's start with the good, interpreting his positioning on the two axes.
As mentioned earlier, SBF shows a genuine interest in the altruism that precedes his wealth. Before founding Alameda, he served as the director of the Center for Effective Altruism for several months. Today, FTX commits to donating 1% of its net fees to charity, a figure that has exceeded $10 million to date.
The foundation of SBF's moral philosophy can be traced back to his parents. Both scholars have shown a strong interest in ethics in their work, particularly in Barbara Fried's writings. In her most famous paper, "What Does It Matter?…," she analyzes the limitations of one of the moral philosophy memes: the trolley problem.
While fully unpacking Fried's argument would represent too much of a detour, this work aligns with our discussion of probabilities in moral decision-making. There is a symmetry here: just as her son has proven adept at explaining the intangible world of financial risk, Barbara Fried demonstrates expertise in resolving moral ambiguities.
In our discussions, SBF pointed out his interest in the works of Peter Singer and early utilitarian Jeremy Bentham. SBF's decision to become a vegetarian resonates with the utilitarian approach to moral analysis:
It's a chicken that has been tortured for six to eight weeks, and then we can spend half an hour eating it. That makes no sense.
SBF's spirit is not just abstract or disconnected from the world he operates in. He also demonstrates a sense of responsibility toward the crypto ecosystem, most notably reflected in his willingness to take on an interim leadership role at SushiSwap. When the creator of the decentralized exchange, "Chef Nomi," fled the project with the tokens, SBF stepped into the power vacuum and steadied the ship. When I asked him about this, he referred to it as "a thing that needed time." He added:
The community was going through a tough time with Nomi's departure. I was just helping to put it in the right place. To get it to stand on its own. I was very excited about everything the team was doing.
In light of his benevolent actions, it is easy to overjudge SBF's motivations. Many media outlets depict his story as a quasi-messianic pursuit within a capitalist framework. But this is detrimental to the reality of company building.
While having a higher mission can be helpful, long hours and sustained pressure are difficult to maintain if not driven by genuine interest.
While SBF possesses admirable moral awareness, we do not need to burden his company with the kind of sanctimonious veneer favored by the founders of WeWork or Goop.
FTX is a business run by merchants.
The second part of SBF's "chaotic good" alliance is, of course, a preference for chaos. This is evident on both personal and organizational levels.
SBF seems to thrive in disorder. On the day I spoke with him, he mentioned that I was his sixteenth meeting of the day. He introduced me to their situation:
Media interview
Media interview
Discussion related to potential venture capital
Discussion with potential FTX Pay partners
Contact with an investment bank
Internal meeting about licensing issues
Internal meeting about regulatory issues
Internal meeting about potential NFT products
Conversation with potential new venture capital partners
Discussion with lawyers about regulatory issues in another jurisdiction
Internal report on regulatory issues
Discussion about a company being considered for acquisition
Internal meeting on legal and compliance
Discussion about potential venture capital to support FTX Pay
Discussion with sports franchise owners about FTX endorsements
Interview with The Generalist
In summary, this included four legal discussions, three interviews, two investment evaluations, one potential acquisition, and some other matters.
As SBF told me, he enjoys this level of activity. "It's intentional," he said, "there are a lot of things happening all the time." Due to his talent and concerning work schedule, he manages this chaotic situation. Part of SBF's biography is that he sleeps only two hours each night, curled up on a beanbag chair scattered around the office.
In the corner of our Zoom call, a blanket lay on one of the beds. As one of his investors told me, "He replies to my texts 24 hours a day."
Setting aside the sustainability of this lifestyle, SBF's preference for chaos feels particularly suited to the market he operates in. As he illustrated while executing Japanese cryptocurrency arbitrage with Alameda, he is at his best when things are unstable. While the rest of the world seeks to restore balance and struggles in the process, SBF sees clearly. He has the talent to assess the chaos, choose a path through it, and act swiftly.
Just as SBF is content to live on the edge in his personal life, he also shows a willingness to run his company in the same way. As he pointed out in our conversation, "Most of life is lived on the edge." Presumably, SBF believes that business opportunities coexist with it.
From the founding of FTX, he has been willing to take controversial actions to achieve his goals. Of course, the chaos comes with downsides.
SBF's efforts are necessary, but they seem unsustainable. Only genetically unusual people can operate under sleep deprivation. Is SBF one of them? Old friends and family know best. Given that the reporting on this issue seems entirely sourced from FTX, I think he does not belong to the minority of insomniacs.
While overly macho investors often insist that founders must overcome this annoying physical limitation to torment themselves, our biological needs often catch up with us. The pressure to build a generational business only exacerbates the likelihood of burnout.
Perhaps the greater risk is that SBF is flying FTX too close to the sun. The worrying part is that in his desire for success, SBF may guide the company across some real or perceived boundaries. For example, when I asked a cryptocurrency investor about FTX's regulatory risks, they replied, "Will they face penalties at some point? Probably." They went on to say that, in their estimation, this would have little impact on the company's trajectory.
While every executive is prone to making mistakes, it is clear that SBF is aware of the risks associated with his business. This makes it hard to imagine a truly catastrophic blunder occurring. While he may be chaotic, SBF is likely to be deliberate.
Rapid Processing Ability
Part of the reason SBF can manage this continuous influx of information is that he seems to possess elite processing abilities. I feel he is pleased to hold 16 meetings in a day, partly because his brain almost… needs it?
While the rest of us might be happy to have a few projects to capture our attention, SBF seems eager to have a dozen or more.
SBF talked about his capabilities in this regard and elaborated on the trade-offs. In a tweet from February this year, he shared some of his thought processes:
According to this silly understanding, there are two types of computer memory: RAM and hard drives.
RAM is fast, expensive, and small.
Hard drives are slow, cheap, and large.
The computer I’m using now has 64GB of RAM and 500GB of disk space.
Moreover, every time you restart the computer, the RAM clears; the hard drive remains and can save state.
Anyway, I find this a useful way to think about how I remember things.
And overall, I think I have a lot of RAM and a relatively small hard drive.
According to his estimation, this trade-off does not mean SBF has a "relatively small hard drive." In fact, this became clear in subsequent posts. In explaining why he often plays League of Legends, SBF pointed out:
I play a lot more games than you might think because I’m someone who often weighs between sleep and work.
Why?
Well, there’s an answer, and it’s obvious. The most common thing about League of Legends (LoL) is that everyone who plays it says they wish they hadn’t played it…
Maybe that’s the answer. Or maybe not…
[When] I’m really, really tired, why do I sometimes instinctively open League of Legends?
Sometimes I’m physically tired, and I just sleep.
But sometimes my fatigue is mental. My thoughts are spinning, and my RAM is filled with things that are important to me.
Because I don’t have much disk space, and I don’t trust it much. I live in my RAM.
Even if I want to clear it, I can’t. No matter if it’s good or bad, those thoughts that are valuable enough to my active memory won’t leave it.
For most people, short-term memory is reserved for things you’ll forget quickly.
But my mind is filled with things to remember, to do, and to think about, and those thoughts linger for a while.
Sometimes forever.
Because once they transition from RAM to hard drive, they basically disappear. The world only exists when I remember them.
So, anyway, sometimes my mind is too full, or stuffed with demanding, tiring things. I want it to calm down.
I’ll try to lie on a beanbag, but that doesn’t help. My mind is still racing.
Obsessed with its looping thoughts.
I lie awake, once again sleepless…
So I’ll open League of Legends.
And I’ll dive into the game without hesitation, pick a hero, and start…
With no room to think about anything else.
So my thoughts shift to a new, very different thought loop, entangled in the final game hit rate rather than responsibilities.
And the old thought loop—that exhausting loop—is forced to disappear from my active consciousness, left to spin on its own. Killing time.
It will come back. A few minutes later, the super minions will invade my thoughts, and my mind will discard thoughts about League of Legends and welcome back the old thoughts.
But I’ve bought myself 30 minutes of calm and given myself time to do what usually happens during sleep:
Give my mind some rest and breathing time.
It’s time to process my thoughts, consolidate them, and make peace with them. Then it starts working again.
Reading SBF's post in a situation away from the dopamine bait of social media is a beautiful piece of writing. Barbara Fried is a versatile poet and professor who would find music in her son's arrangement.
But it is clear that while SBF possesses supernatural processing speed, it may lead to exhaustion. Similarly, the urgent task here is for investors and leadership to ensure that sufficient resources are allocated to alleviate the pressure on this FTX founder.
Skepticism of Conventional Wisdom
One of my favorite quotes comes from Machiavelli's The Prince:
A foolish prince cannot receive wise counsel… Good advice depends on the cleverness of the prince seeking it.
SBF is a prime example of this. You get the sense that every viewpoint is built from scratch rather than casually borrowed from previous teachers.
For instance, at some point in our conversation, he mentioned how he was persuaded by the saying, "It's better to be safe than sorry."
Is it?
As SBF countered, "Does this idea and advice bring value to the world?"
This is a small anecdote, but it embodies the way SBF thinks and solves problems. He exhibits a healthy skepticism of conventional wisdom and starts from first principles. This is a characteristic emphasized by Kyle Samani, an investor at Multicoin Capital, regarding FTX.
Samani has repeatedly stated that SBF is an exception in this regard, showing an obsession with "first order correctness." Regarding this issue, Samani recalled a conversation where SBF considered building Serum on Solana instead of Ethereum.
In a brief 30-minute call with Samani and Solana founder Anatoly Yakovenko (remember this rapid processing ability), SBF carefully considered the needs of the new system, analyzing factors like optimal throughput and acceptable latency. Ultimately, he made his own decision: Serum would use Solana.
Almost all great entrepreneurs exhibit some preference for thinking from first principles—innovation often requires looking at a static set of problems and remixing different elements. If this approach typically has a trade-off, it is often speed—rebuilding problems from scratch takes time. Clearly, this does not seem to be an issue for SBF.
Ability to Switch Perspectives
Perhaps the highlight of my conversation with SBF was when he disappeared into a rabbit hole about perspectives. We had been discussing the thinkers he enjoys, and the question was not entirely comfortable:
[Not just one person.] I try to piece together bits and pieces from different people. In many cases, people gain very important insights that I miss. Then they also have a lot of very silly ideas.
He spoke with a pleasant frustration about how people often offer advice when they cannot provide it. They may think they have a grasp of the situation and its various complexities, but in reality, they lack useful context. He pointed out that this is one of the obstacles to running a cohesive team: sometimes employees stubbornly cling to issues they believe are overlooked, but which have actually been considered.
SBF finds this quite annoying, which tells us something about him. Whenever he listens to someone's opinion, SBF seems to be mentally navigating between their viewpoint and those of dozens of others.
Again, Samani described this ability as a special gift. Like no one he has ever seen, SBF can leap between details and then jump to a macro perspective. He understands the details of every trade that could take place on the FTX platform while also strategizing against competitors. He seems equally able to navigate freely between the functional perspectives of team members.
Like the previous traits, this gift may slow down decision-making for others, but not for SBF. Perhaps the more reasonable risk is that SBF expects other members of his team to see a similar panoramic view, and if they do not, he may feel frustrated.
It is difficult for anyone else in the organization to possess his insights, especially across different entities. Does this lead to turbulence? It seems unlikely that issues would arise that would have an impact.
After researching Sam Bankman-Fried, it is hard not to be impressed. In my interviews with investors, crypto experts, and him, I was struck by the fact that he is a special executive and an unusual person. One source said very seriously, "SBF is the most capable person I have ever met. This should be explained as broadly as possible."
Open and mysterious, practical and intellectual, moral principles and operational flexibility, SBF showcases a rare set of personality traits that make him almost an ideal candidate in his field of work. Like others, he seems able to navigate chaos with ease, calculating and calibrating the ever-changing landscape of risk.
At FTX, he has found his cathedral. This fastest-growing exchange in the crypto industry is highly creative and very bold. This is not to say it has not sparked controversy. In Part 2, we will explore the victories and weaknesses the company has achieved. But for now, we can be certain that it has a fitting ruler.
