Book review: Going Infinite

Michael Lewis writes a hagiography for a psychopath

Michael Lewis’s Going Infinite: The Rise and Fall of a New Tycoon is a Michael Lewis book, which is to say that it’s immensely well-written, thought-provoking, and entertaining. I devoured it in a weekend and was left wanting more. It’s a great yarn filled with quirky characters and anecdotes that are interesting in themselves while also reinforcing the larger themes of the book. Insofar as the point of a book review is to give the reader a recommendation for whether or not they should read the book, I’m happy to report that the book is well worth your time. But be sure to read it with a skeptical eye. Lewis draws some interesting conclusions on the basis of the facts he presents. I draw different conclusions.

The book is organized in three parts. The first chapter is a slice-of-life from when our protagonist, Sam Bankman-Fried (SBF), the head of crypto exchange FTX, is at the height of his wealth and power, playing a video game while he’s tabbed out of a Zoom call with fashion mogul Anna Wintour. We then learn about Sam’s childhood and early career until he leaves the hedge fund Jane Street. The second part of the book is about SBF’s founding his own hedge fund, Alameda Research, and then eventually the FTX exchange. The third part of the book begins when Michael Lewis himself enters the scene to work on a book about SBF and FTX — shortly after which, FTX goes bankrupt and SBF is arrested, with Lewis right in the thick of it to watch the whole thing go down.

It’s telling that Lewis arrived on the scene before the implosion of FTX. While Going Infinite ends up being the story of the fall of SBF and FTX, it’s clear that this wasn’t the ending that Lewis had anticipated for his book. This is Lewis’s fourth book about high finance. His first three, Liar’s Poker, The Big Short, and Flash Boys, all explored, in different ways, the inherent corruption and soullessness of the global financial system, peopled by greedy assholes who made obscene fortunes while providing little of actual use to society. SBF was supposed to be different. He was making obscene amounts of money in crypto, but his ultimate goal was to give it all away, to make the world a better place. Lewis, it seems clear, had intended to write a hagiography of the man who made money for the purposes of genuine altruism. When FTX imploded, Lewis’s story had an ending, but it was a different one than he wanted. You can still see the outline of the earlier story in there, and it resurfaces towards the end when Lewis suggests a story that would exonerate SBF for his alleged crimes. The story Lewis ultimately wants to tell is surprisingly plausible. But it’s not nearly as exonerative as he seems to think.

Here are the facts of the case (as I laid out in detail in an earlier post, and as the book confirms): SBF owned two entities, the crypto exchange FTX and the hedge fund Alameda Research. Money deposited in FTX for trading crypto was supposed to be locked up tight. Yet some $8 billion of customer funds found their way over to Alameda Research. This was not closely tracked. The bookkeeping at both FTX and Alameda was somewhere between abysmal and non-existent. So when there was a run on FTX, there was no money. Facing bankruptcy, they went looking for a rescue, but no one would touch FTX when there was $8 billion missing and no one could explain where it went. It had gone to Alameda and then… poof, gone. FTX went into bankruptcy and SBF was arrested.

The big mystery is: where did the money go? There are basically three possibilities. (1) SBF or some other cronies stole it all. This is what most people in the press seem to think. (2) Alameda gambled it all away. This is immensely plausible, and is basically the theory I endorsed in my last post. If Alameda hadn’t lost obscene amounts of money over the summer of 2022, they’d be the only hedge fund that hadn’t. Lewis wants to present a third possibility: (3) It was in Alameda the whole time, in hundreds of scattered bank accounts and ersatz wallets. But because no one was doing even a partway decent job of keeping the books when the run on FTX happened, no one could remember which couch cushions they’d put the money behind. Alameda had lost the money, but only in the sense that you lose a $20 when you put it in your back pocket and forget about it and you find it a week later in the lint trap of the dryer when you’re doing the laundry.

In Lewis’s telling, there are two real villains of the story. The first is FTX’s head counsel, a lawyer from a big New York law firm that had joined FTX just to direct FTX’s business to his old firm, at which point he would return, a hero, with an enormous bonus. When the run on FTX happened, this lawyer turned whistleblower and brought the force of the law down on SBF before our hapless hero had time to turn out the couch cushions and find the money he’d squirreled away God-knows-where. When this sent FTX into bankruptcy, the lawyer’s old firm was on hand to take the tens of millions in fees they would earn by managing the bankruptcy. The second villain is the current CEO of FTX, John Rey, who was brought in to manage the company in bankruptcy after SBF was removed. Rey decided from day 1 that SBF was a liar and a crook and he’d never listen to a word he said, and didn’t give SBF a chance to explain things, set things right, or point him to the money. Lewis doesn’t portray Rey as the same sort of moustache-twirling villain as the lawyer, just a very hard-headed and very old-school guy who made things vastly worse by never letting SBF just explain.

Even if this story is true, SBF is still guilty. FTX’s customers’ money should never have ended up in Alameda, period, no matter what happened to it after that. There are laws that require you to keep track of these things, and to tell your customers, truthfully, that you’re keeping track of these things. Those laws were broken. Much of the money ended up in Alameda because Alameda was exempted from FTX’s risk control measures. SBF argues — and Lewis dutifully reports — that there’s an innocent explanation for that (which you can read in the book), and perhaps that explanation is correct. But it’s hardly an innocent explanation. If you loudly advertise the quality of FTX’s risk control measures (as FTX did) while exempting yourself from them, that’s a material misrepresentation to clients and investors. All of this is fraud. SBF is guilty of fraud. This is hard to deny, even if he never stole a cent. Lewis doesn’t mention this.

Lewis also presents shockingly little evidence against the first two possibilities. That SBF stole the money doesn’t seem to ever seriously cross his mind. What about the possibility that Alameda lost it when crypto prices dropped right before FTX went belly-up? SBF told him that didn’t happen. That’s good enough for Lewis.

Michael Lewis clearly seems to trust SBF. I’m baffled as to why. SBF clearly seemed to Lewis like a genuine, honest guy who really wanted to make the world better. But was he trustworthy?

In that first chapter, when SBF is playing a video game when he’s dumbly nodding his way through that conversation with Anna Wintour, SBF agrees to attend the Met Gala as Wintour’s guest of honor. The day of the event, he blows Wintour off, to her fury. Why? The way Lewis explains it, SBF is an ideal Bayesian calculator, always crunching the numbers, always looking for the highest percentage play. He never commits to anything, since commitment precludes further idealizing calculation. It sounds to me like he told Wintour he would do something for her, then didn’t. It sounds to me like he lied. Lewis assures us that SBF never really intended to follow through on what he agreed to do, and that he never does: he blows off people all the time when the probabilities shift in another direction. It sounds to me like SBF lies all the time, callously, when it might be in his self-interest.

And is SBF really an ideal probabilistic calculator? Why does Lewis think he is? Surely that’s how SBF described his reasoning to Lewis, but I call bullshit. One of the running themes in the middle section of the book is SBF’s utter disdain for adult authority. The experienced hands brought into FTX to help SBF keep his books and manage his risk bore him to tears, and they anger him because they tell him not to do things that he wants to do. In SBF’s thinking, they obsess over unimportant minutiae and so prevent him from pursuing his visionary plans. Yet the minutiae that the experienced hands obsessed over were precisely the things that brought down FTX. Bad bookkeeping, above all, but a host of other silly decisions as well. Lewis presents this as being ironic. But while it’s obvious that he should have done things differently in retrospect, that was also obvious in prospect, too. Keeping very strict track of all the money is incredibly important if you’re running a financial institution, for a huge variety of reasons! No reasonable person would ignore the risks that he should have been aware of and which ultimately brought his empire to ruin. The probability of failure was high and the cost of failure catastrophic. An ideal probabilistic reasoner would have followed the experienced hands’ advice. SBF did not.

In light of SBF’s manifest failures of “Bayesian rationality” about the things that mattered most for his business, it’s worth re-examining his habit of constantly changing his plans and blowing off others. Was he constantly recalculating the probabilities as new information came in? Or was he just pathologically impulsive?

After FTX came crashing down and before the authorities came to haul SBF away in cuffs, a few employees hung around to help sift through the wreckage and find out what had happened. One, Constance Wang, found out that she’d been dramatically underpaid in stock compared to other senior members of the team. She was furious, but kept it hidden. She wanted to get SBF to confess to his crimes, to explain to her why he did what he did. To draw him out, Wang tried a number of strategies, eventually confronting SBF with the reality of the harm he’d inflicted on others:

Even here, however, she found herself talking past Sam: in his telling, he hadn’t realized how much risk he’d subjected others to without their permission. Constance nevertheless sensed that he didn’t really register the damage he’d caused to other people in the way that, say, she might have. “He has absolutely zero empathy,” she said.

Antisocial personality disorder is a personality disorder characterized by a limited capacity for empathy and a long-term pattern of disregard or violation of the rights of others. Other notable symptoms include impulsivity and reckless behavior (including substance abuse), a lack of remorse after hurting others, deceitfulness, irresponsibility, and aggressive behavior.

Patients with ASPD tend to describe emotions with ambivalence and experience heightened states of emotional coldness and detachment. Individudals with ASPD, or who display antisocial behavior, may often experience chronic boredom. They may experience emotions such as happiness and fear less clearly than others. It is also possible that they may experience emotions such as anger and frustration more frequently and clearly than other emotions. People with ASPD can have difficulty mentalizing, or understanding the mental state of others. They may also display a perfectly intact theory of mind, or the ability to attribute a mental state to oneself and others, but an impaired ability to understand how another individual may be affected by an aggressive action.

Those last two paragraphs are from the wikipedia page for anti-social personality disorder. That is the clinical name for the mental disorder more commonly known as psychopathy. Over the course of Lewis’s story, SBF checks every one of those boxes. In descriptions of SBF’s childhood, Lewis recounts his constant boredom, his flat emotional affect, his inability to feel happiness. There’s plenty more on the wikipedia page that describes SBF as well. Lewis recounts how SBF had to learn how to relate with others, mechanically forcing himself to smile, and eventually learning how to go over the top in agreeableness because he found it easier to get what he wants from others that way. This, too, is classical behavior by clinical psychopaths. In fact, psychopaths can become so practiced at ingratiating themselves with others that they can end up being outright charming.

In the preface to the book, Michael Lewis describes his first meeting with SBF. The two are introduced by a mutual friend who is thinking of investing with SBF and wants Lewis to sound out SBF, figure out what kind of a guy he is. The two take a hike together and, as they walk, Lewis is floored by the scope of SBF’s ambitions.

By the end of this walk I was totally sold. I called my friend and said something like: Go for it! Swap shares with Sam Bankman-Fried! Do whatever he wants to do! What could possibly go wrong? It was only later that I realized I hadn’t even begun to answer his original question: Who was this guy?

That’s a killer line to end the preface with. Michael Lewis is a great writer. And I think Lewis, ultimately, did a great job answering his friend’s question. But as he makes excuses for SBF throughout the book’s final pages, I was left wondering whether Lewis realized what that answer really was.