FTX: Is the Effective Altruism Movement (Finally) Over?

The recent downfall of the FTX corporation has led some to wonder whether its founder’s emphasis upon “effective altruism” (EA) will turn EA into a casualty of the debacle. I doubt it will. But this by no means implies that the EA movement stands upon firm intellectual footing. It does not.

That the founder of FTX proclaimed the virtues of “Effective Altruism” is clear. This was nothing short of FTX’s founder’s vision of their corporate future. Or so the story went. Their pitch was that investment in that platform would yield incredible richness under the heretofore unexplored platform of crypto currency marketplaces with the added bonus that, at some unnamed point in a future of uncertain distance from us, it will all be given to causes that make the world a better place.

Perhaps this pitch was sincere or insincere, foolish or daring. For my part, I don't wish ill on anyone, whether FTX management or their investors. But I do point out that all of the talk since the collapse is in regards to the recouping of investments, not in regards to the loss of morally valuable social programs FTX was alleged to have in its R&D department. We think it appropriate to ask charities to return FTX donations to investors, but wouldn't dream of including pledges to philanthropies as a part of bankruptcy proceedings.

My introduction to the EA movement did not come from moral philosophers or economists. That introduction happened in the office of a successful hedge-fund president. The president slipped me a copy of a seminal work in the EA movement and spoke glowingly about the daring vision of the future provided in the pages. I only had a chance to skim a few pages in his presence but surmised that the EA movement was just a fundraising and marketing term for Utilitarianism – a 19th century movement in philosophy which began with the much-overlooked issue of prison reform.

Sharing that gloss appraisal did not go down well during that meeting. But in the years since then my opinion of the EA movement has not changed much. In fact, I have come to type-cast the profiles of those who are impressed with the EA movement, finding the issue of who would be impressed with it to be far more intellectually stimulating than the issue of whether we ought take the EA movement seriously. The commonalities of the faithful adherents, so far as my own experience attests, is that they are:

1. Educated, white males living in large cities of the western world
2. Inclined to practical matters and averse to nuance
3. Creators of new wealth, not inheritors of old wealth
4. Involved in the financial services sector
5. Inexperienced with professional philanthropy
6. Searching for deeper meaning
7. Resentful of accusations that wealth equates immorality
8. Even more resentful of banks and traditional financial structures

Seen this way, the EA movement is a powerful PR and marketing tool, effectively manipulating the wealthy into making financial decisions (donations) which benefit other parties. To appreciate this more fully, it is helpful to appreciate the lived experiences of someone who has managed to create a fortune ex nihilo.

In so doing one experiences the reality of the disturbing aphorism that one has to “crack a few eggs to make an omelet.” Making a new product implies defeating other competition. This means that other empires will fall and certain marketplace sectors will be “disrupted.” Along the way there are thousands of murky moral decisions which must be made. Shall we fire ten people who depend on their jobs in order to save the livelihoods of 300? Will I sell my widget to as many persons as possible, even if they don’t need it? Is it wrong to buy a hospital just to close it? Is it wrong to profit from consumer ignorance or to sell to a consumer something that they already own? Does causing pollution in another country mean that I’m a saint for not doing it here? How do I save the corporation I built from my family that would certainly ruin it? These and so many other tricky moral issues are what one signs up for when one signs up to be a successful entrepreneur. It’s a lonely road, and it's no coincidence that entrepreneurs are often portrayed as anti-social.

The EA movement provides an elegant response to each of these tricky questions: Do whatever makes the world best. And after you do it, no matter how angry you have made people, you’re a good person for having done it.

But therein lies the EA con-job. The reality is that economies and nations and even individual persons are so complex that no one has ever managed to model them effectively. To a person with a conscience, and all successful professionals that I have known who engage in the EA movement have admirable moral consciences, this is troubling. We want to do what is best, but it is rarely clear just what that “best” might be.

Here is a vignette that illustrates this point. It is obvious that sub-Saharan Africa suffers from poverty. The most flat-footed response to this problem is to do something that raises African incomes. I once observed a project that did just this. Project leaders cajoled rural African farmers to grow a cash crop in stead of a subsistence crop. Financial models had predicted that while they would not be growing the food that they needed for their families, the would quadruple their income at the end of the season. They could then easily buy everything they needed with plenty of cash left over. ?

Project organizers were able to convince a town’s farmers to do so. And it worked. The crop succeeded and farmers inherited a windfall. Then there were the unintended consequences. Alcoholism skyrocketed, spousal abuse quintupled and the population of orphans soared. The new wealth farmers were drinking themselves to death, beating their wives along the way.

Seen from this perspective, what the EA movement promises, and what it has always promised, is only as robust as a tautology: that if we manage to do everything for the best, then everything will be better. True enough. The problem is that with humanity’s worst problems, it is never clear what is best.

There always were other problems with the EA philosophical system, and those problems have been well-chronicled over the past 150 years since Bentham and Mill did their pioneering work. Utilitarians are well aware of them, and have responses of varying degrees of plausibility. Those problems, in no particular order, are:

1. EA is inconsistent with activism. Activism begins with conviction of a truth and proceeds to implement that conviction. This is forbidden for the EA devotee.
2. EA is inconsistent with most forms of religious perspectives of the moral good. This is a significant problem, since a huge swath of philanthropies are religiously-based. And religions tend to view the good as something rooted in principles and rules, not consequences and payoffs.
3. EA is incompatible with the notion of human rights. The “gotta crack a few eggs” principle reveals this.
4. EA undermines personal dignity and interpersonal commitment. What a person thinks or believes or feels is inconsequential when it comes to what one ought to do.
5. EA has never racked up the long-term wins that one would expect of a financially robust movement, such as it is. I would bet a pile of Honduran Lempiras (see picture above) that impoverished Mennonites in Honduras will vastly outperform an EA initiative in that country, were they ever matched-up toe-to-toe. Because while EA has amassed fortunes and capital, the Mennonites have two centuries of love and trust behind them. Those are virtues that change things since by definition they can’t be squandered. Money, however, spends fast.

UPDATE 4 Dec, 2022

There is now something akin to a “Dogpile on EA” brewing in the press.

The New York Times offers the only recent defense of the position I can find in the popular press. There we are told that we ought to stick with EA, but manage to identify the good with greater precision. Stay tuned for chants of "follow the science."

But most assessments are not so rosy and not so inclined to defend the one true faith.

The New Yorker admonishes EA-ers to adopt something like virtue ethics (especially the virtue of honesty) while still – inconsistently – claiming to endorse EA. The Chicago Tribune has posted an op-ed claiming that FTX management were not EA-ers at all , which I gather to be a twisted defense of EA against perceived ad hominem.?In a bizarre fit of reasoning, MSNBC seems to imply that EA caused the FTX collapse. I am no fan of EA. But I know a hit-piece when I see one.

Then there are innumerable info-tainment pieces which allege to educate the reader on the nuances of EA. As a rule, their accuracy is highly variable.

The truth of the matter is that EA falls victim to a boring problem not uncommon to human thought-systems: It’s a bad idea.