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Musk Fast and S.B.F. Things + A Big DC Gala
I could have put a sub headline here, but I didn't, and you can't make me
The full Puck article attached to this newsletter is over here.
I’m writing this from Washington, D.C. where last night I hosted the Portrait of a Nation Gala at the National Portrait Gallery. The event honored Dr. Anthony Fauci, Marian Wright Edelman, Venus Williams, Ava DuVernay, José Andrés, Clive Davis, and Serena Williams with awards and placement of their new portraits in the museum collection for the next year. I always love returning to my hometown of D.C., but this was extra special. I felt like I got to take part in some form of national service and got to hang out with presenters like Hillary Clinton and Alicia Keys. Yeah, humble brag time!
Here’s a photo with all the honorees plus their presenters. Left to right the presenters in the back row: David Rubinstein, Isabel Wilkerson, Alicia Keys, Hillary Clinton, Sonya Haffey, Isha Price, Mellody Hobson, and Laurene Powell Jobs. That’s me on the far left next to Uncle Doctor Tony Fauci!
The National Portrait Gallery is part of the Smithsonian and has been expanding the types of pieces it exhibits well beyond past presidents and first ladies, so it was a real honor to play a role in this. I’ll post more behind the scenes photos and videos on my Instagram including a focus on each portrait, so stay tuned there for more. As I’ve been walking around D.C., I visited a great exhibit at the M.L.K. branch of the D.C. Public Library focused on the city’s history and the role of go-go music; I overheard lots of policy and politics conversations at the bars because that’s what people downtown do here; and I saw too many rats. The other night I saw a group of rats frolicking as if they were squirrels. Not cool. In unrelated but exciting personal news, my PBS series America Outdoors with Baratunde Thurston has been nominated for an International Documentary Association award!
In my most recent newsletter, I wrote about a billionaire spending extraordinary amounts of resources on a vision of social media that no one seems to want (Zuckerberg) and a person who was no longer a billionaire because of his damaging behaviors (Kanye West). This week I find myself working with oddly similar subject matter as I reflect on the newly-former billionaire Sam Bankman-Fried and the value-destroying behaviors of Elon Musk over at Twitter. To close out I’ll share a few thoughts about the midterm elections.
The full version of the below is over on Puck, but I’ll share meaty excerpts here.
Musk Fast and S.B.F. Things
By now you’ve likely heard about the stunning collapse of Sam Bankman-Fried’s crypto exchange, FTX, and its associated high-risk trading company, Alameda Research. I won’t attempt to fully summarize how FTX went from being worth some $32 billion to declaring bankruptcy, practically overnight. But at its core, the story is this: S.B.F., as he’s known, and the byzantine web of companies that comprised his crypto empire, hid things from investors. He reportedly lent billions of dollars linked to depositor funds from FTX to Alameda; took outsize risks with other people’s money; experienced a liquidity crunch and then a modern-day bank run when a rival crypto king, Binance’s Changpeng “CZ” Zhao, tipped the first domino by dumping his FTX tokens.
In the end, it appears S.B.F. has lost everything. His reputation, of course, is toast. His personal wealth has all but evaporated. FTX investors, employees, customers, portfolio companies, grantees—all will now have to fight for pennies on the dollar in bankruptcy court, if there’s anything left to fight over. Since declaring bankruptcy, hundreds of millions of dollars worth of funds have mysteriously disappeared from the exchange in what looks to be a hack but could be something worse.
There are two things that strike me about this collapse. The first, of course, is the familiarity of this particular scandal. Whether FTX’s troubles were more like those of Long-Term Capital Management or Bear Stearns or Madoff or Archegos Capital, we’ve been here before. But weren’t these precisely the types of hidden risks—conflicts of interest, duping investors, absconding with funds—that the brave new world of “DeFi” (decentralized finance) was supposed to rise above? Crypto, after all, was born out of the financial crisis. The Bitcoin whitepaper, released in 2008, heavily emphasized transparency and trust, which the established world of finance had failed to offer—remember synthetic CDOs?—and Bitcoin was pitched as a corrective. There could be no secret deals, no hidden risks, because it should be technically impossible to hide risk in a fully transparent, “trustless” public ledger.
Of course, the crypto industry is bigger than Bitcoin, or the blockchain, and what Bankman-Fried built, in retrospect, looks much more like the pre-Sarbanes-Oxley, pre-Dodd-Frank finance of old. This was the same old shenanigans with new labels. S.B.F. ran both companies, FTX and Alameda Research, from the Bahamas, with the leaders of both firms literally living in the same penthouse and dating each other. The balance sheet wasn’t public, the concentration of risk wasn’t public, and unlike the rules established for traditional finance since 2008, today’s DeFi companies have no obligations in terms of the assets or collateral they have to keep on hand. “I fucked up,” S.B.F. wrote on Thursday, just a few hours before he declared bankruptcy. “A poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower.” Oops?
Which brings me to the second striking aspect of the S.B.F. drama: the sheer velocity of his rise and fall. Usually it takes many years, even decades, for a person to go from unknown upstart to fast-rising star, dominant player, political influence-peddler and philanthropist, and then to scandal-plagued rogue and untouchable pariah. Think about the long history of an institution like Lehman Brothers or a character like Harvey Weinstein. It literally took decades to build them up and weeks, months, or even years for them to fall. But with Bankman-Fried, everything happened at lighting speed.
Check out this timeline: S.B.F. was born in 1992. He graduated from M.I.T. in 2014, just eight years ago. He founded Alameda Research, his crypto trading firm, in 2017, and launched FTX in April 2019. By October of last year, he was being hailed as a wunderkind worth $22 billion. That same year, FTX bought the naming rights to the arena where the Miami Heat play. Major League Baseball umpires wear FTX patches on their uniforms. The company inked deals with Tom Brady and Steph Curry and put up billboards of Bankman-Fried and supermodel Gisele Bündchen touting their mission to “help create positive change.”
Of course, once you become a billionaire in a narrow domain, our society encourages you to throw that money around in totally unrelated fields of philanthropy and politics, so S.B.F. became a player. He funded Democratic candidates. He spoke about his views on “effective altruism.” People came to him for money and insight and advice on all sorts of things unrelated to buying and selling crypto. He spoke at conferences and was profiled by the media. Within the world of crypto, he talked up the need for regulation even as his own companies were entangled in the most basic and obviously improper behavior. Just this year, as the crypto industry experienced its first of several mini collapses, there was S.B.F., bailing out companies like Voyager and BlockFi, a white knight propping up their houses of cards. Now he too is worth nothing, and as my Puck partner Teddy Schleifer has written, that decline may impact the Democratic party, pandemic preparedness efforts, and more.
I don’t really care about S.B.F.’s net worth. I was never impressed with him to begin with. But I am concerned on behalf of regular people who were bamboozled by the larger brand halo surrounding S.B.F., the aura of legitimacy that he cultivated and accrued, into thinking that businesses like his are good places to put their own real-world, hard-earned fiat money. I’m frustrated that people like Sam, generally men with a technical skill set in one particular area, are afforded so much latitude to preach about how the “real world” works. Meanwhile those directly living that real world beg to be taken seriously or empowered to solve their own problems.
I’ve been fascinated by crypto and the larger, vaguer web3 world this past year. I remain excited by the promise of more financial inclusion, new ways of self-governing, and transparently handling budgets. But I also remain skeptical, primarily about the premise that the key to unlocking our future lay in financializing everything. At the end of the day, the core of S.B.F.’s empire was buying and selling nonsense but taking real people’s money to do it. I hope as the fog of quick money-making and hyperbolic promises clears, we can see just how much real land there is for us to build on, or realize we’ve all been taken completely out to sea.
Twitter After Elon
While we’re on the subject of overconfident white men operating well beyond their domain of expertise with a callous disregard for the people affected by their decisions, let’s move on to Uncle Elon.
There are so many changes one could make to Twitter to make it a better business. One of my favorite YouTubers, Marques Brownlee, recently shared a number of ways for Twitter to better cater to and grow an economy around creators, such as building better monetization tools like ads, tips, and subscriptions, while also making the Twitter Blue product actually compelling. As a creator and community-minded person myself, I can envision many tools I’d happily pay for, including advanced audience insights, portability of my subscribers and followers, and segmented marketing and messaging capabilities that would be worth a lot.
There are also many changes one could make to Twitter to improve its safety and trust levels and stabilize its culture into something more people want to spend more time with—including advertisers. The idea of social networking over the past 15 years has operated on a simplistic and sometimes dangerous premise that anyone should be able to address everyone with anything. Handing a global P.A. system over to everyone with a smartphone has obvious risks. And so many smart folks inside and outside of Twitter have good ideas to move beyond this. I’ve written previously about Majal.org, which operates a social network that unlocks user privileges over time, based on positive contributions, which has the effect of limiting trolling and building something like an actual community. The organization New Public has literally researched what makes for a high-quality digital public space, and all that research is available for someone who says they are interested in building a digital town hall to use and implement.
But I’m pretty confident that none of that is going to happen at Twitter. While Elon Musk’s takeover theoretically represented an opportunity to reset the company for the better in terms of financials and culture—Twitter’s product development pipeline, while thoughtful, arguably operated too slowly—Elon has reminded us all in the past two weeks that moving fast can break things, too, especially when you’re ramming needlessly through obvious barricades that are in place for good reasons.
Casey Newton at Platformer is essential reading for the latest and opposite-of-greatest happenings inside Twitter…..
Get the rest of this article including my thoughts on the midterms over on Puck. And let me know your own post-Twitter plans if you have any. Are you emigrating to a new digital land? Replacing Twitter time with family time? Changing nothing about your life at all?
If you are considering leaving Twitter or bracing for the likely scenario that the service literally falls apart in the near future, here’s some other ways to stay digitally connected to me: Join my free text line by texting “recommentunde” to +1-202-894-8844 or visit my Linktree to find me in a digital space you already inhabit.
Have a great week, and congratulations USA for fending off authoritarianism! Let’s help Senator Warnock win the Georgia runoff. I recommend supporting the New Georgia Project which I think has a more sustainable citizen engagement program than a political campaign, but there’s many ways to help. At a minimum check in with people you know in Georgia to see if they are planning to vote in the runoff. It’s not enough for the Democrats to keep that 50/50 Senate. Besides the fact that Hershel Walker has absolutely no business in the U.S. Senate here are some other reasons to add one more seat: so the Democrats have some margin for these very old senators to get sick; so Vice President Harris can do more than break ties; so we don’t have to live under de facto President Joe Manchin.
Thanks for reading!