SBF (and like half the people at Alameda) worked at Jane Street or other big name financial firms. They weren't ignorant of traditional finance.
SBF worked at Jane Street, but he must have been there in a capacity that insulated him from this sort of knowledge. At large firms such as that there are very specialized roles that juniors typically start within, where the visibility is fairly limited.
My only question is was he able to pay for his private jets or residences in FTT? He seemed pretty convincing to a lot of people so it would be interesting to see if everything was paid in his own made up currency.
SBF is notorious for advocating expected-result decision-making with risk entirely disregarded, and essentially saying if you aren’t in the high risk range where the median (rather than expected) result is break even or worse, you are usually being too cautious; he's not ignorant of risk, just deliberately contemptuous towards it being a negative factor in decisions.
Turns out, when you chase Gambler’s Ruin that hard...
And I'm not buying into his whole effective altruism thing. What I think is that SBF had a strong desire to make money, ethics be damned, but had a troubled conscience. Effective altruism gave him moral comfort and helped him rationalize his actions.
Only because you seem to be reading into it a positive moral judgement that I did not, in any way, express.
> Misappropriating custodial funds is not ever acceptable when you are running an exchange, no matter how good your EV looks like.
I didn’t say it was.
> And I'm not buying into his whole effective altruism thing.
SBF doesn’t just advocate that method of decision-making in the context of EA, he advocates fairly consistently for financial and other decision-making.
I was an options market maker. That taught me a lot about options but little about finance. The latter comes from curiosity and initiative, up to and including reading history books. Given SBF was post book or whatever, the ignorance isn’t surprising.
Not sure of the timeline but she was asking why not double down on a 50/50 bet every time (if you lose) - you can earn "infinite" money but lose only your bet.
I am not sure working somewhere means you are an expert in it. It's incredible these people managed to create a company size of FTX.
I'm pretty sure you're referring to this tweet
https://twitter.com/0xHonky/status/1591630071915483136
In which case she wasn't the person asking the question. Somebody else was asking it, and she was unequivocally saying that it wouldn't work.
> (I'm not an expert on traditional finance but my impression is that it's a lot more boring; largely brokers will just try and have margin requirements conservative enough that it's very unlikely for you to actually lose all your money.)
This person was managing all that money.
1. "I'm not an expert on traditional finance"
Clearly.
2. "it's a lot more boring"
So I knew this guy who used to game the customs at New Delhi airport. Back in the day he would fly over to Singapore, buy some expensive electronics, and try to get it past customs without paying duty - he was a "mule."
There was one particular customs agent who knew this guy and would catch him. The mule would pick flights during that agent's shift - told me that it was boring otherwise.
These kids were getting a kick out of risky trades.
3. "conservative enough that it's very unlikely for you to actually lose all your money."
This tells me they knew what they were up to and they didn't really care - it was part of the game.
The whole saga is fascinating. Can't wait for the book/movie combo to come out.
>Clearly.
And is that a problem? "traditional finance" is a sprawling subject. There are literally four year degrees on "finance". Yet, jane street hires (a "traditional finance" trading firm) regularly hires people with only mathematics degrees to trade for them. Other hedge funds/trading firms do the same as well.
> 2. "it's a lot more boring"
>There was one particular customs agent who knew this guy and would catch him. The mule would pick flights during that agent's shift - told me that it was boring otherwise.
>These kids were getting a kick out of risky trades.
Don't you think you're reading a little too much into this? Someone calls traditional finance boring so they must be some sort of adrenaline junkie?
>3. "conservative enough that it's very unlikely for you to actually lose all your money."
>This tells me they knew what they were up to and they didn't really care - it was part of the game.
In some ways traditional finance's margin requirements are more conservative. Regulation T specifies that for stocks, initial margin is 50% (ie. if you buy $100 worth of stocks, you need to pay for $50 out of your own pocket), and maintenance margin is 25%. A quick search says that FTX's margins are 10% and 5% respectively. However, in other ways traditional finance's margin requirements are looser. Because they expect that the lender is a legal entity they can go after, they're much more lenient when it comes to liquidating customer's accounts. That's how lenders got burned on Archegos, because Archegos were giving excuses, the lenders believed them (also, liquidating your customer is rude and they don't want to lose their business), and didn't liquidate them. Crypto on the other hand is far more conservative in this regard, because they basically assume that the only assets you have are the assets in your account. To that end, crypto exchanges (including FTX) have margin monitoring 24/7 and will automatically liquidate customer accounts when they dip too low. So to get back to your original point, they do care, and it's something they thought long and hard about.
I look forward to seeing how this plays out, especially for Lewis' book.
Still the whole blog and her various public interviews are wild. I know we are operating with the benefit of hindsight but I find her very unconvincing - for example when asked about math in her job she said she doesn't use any really, except maybe elementary school math. That you only need to be able to take some risk (laughs awkwardly).
> It's incredible these people managed to create a company size of FTX.
Didn't they got hundreds of millions in play money from their network (school friends). This worked while everything was going up and new cash was coming in.
"Never confuse being long in a bull market with genius."
--John Bogle
Jane St is a prop trading firm - the only money they have to lose is their own.
It would be worrisome if most of Alameda was full of ex-JS traders, who had been there for 7+ years.
A plausible story to me is that they were good at whatever they screen for in the interview and then at Jane Street they made a bunch of money. Then they attributed too much of that to themselves and not enough to whatever institutional processes and risk frameworks they benefited from. They bring themselves but not those processes to their own trading firm, and then boom!
for me just knowing how to setup a quant trading firm, how to choose prime brokers, how to find and select vendors, leased lines, how to setup paper work, cap intro relationships, exchange memberships, FIX certs, are of equal value as alpha tricks, and really I dont even see a lot of evidence that the Almeda / FTX people were particularly well-seasoned in any respect.
But the point is you can't infer anything about Jane Street risk controls from people who didn't have that role.
I'm talking about the Jane Street risk control people not being able to filter out two of the biggest fraudsters of this century. Yes, I know that, technically, the Jane Street risk control people most probably only focus on the risky stuff that might bring their house down, and, as such, they most probably wash their hands when it comes to the deeds of their former employees, but I was under the impression that when those sort of shops hire someone there's also a general screening for "is this a guy/lady that is going to swindle billions of dollars in the near future"?
And, to be honest, I guess that's what the cachet of people like SBF was, especially in a very deregulated and wild market like crypto is. More exactly "normal" people would have thought along the lines of: "this guy has worked for Jane Street -> I've read Jane Street are cool, honest people, so they must have done some vetting of their employees -> SBF most probably won't run with my money".
More generally speaking, as you most probably well know, the whole house of finance is built on trust and trust alone. That goes for crypto, that goes for traders like JS, that goes for boring money market funds, that goes for the FED itself (probably with trust decreasing from Fed -> to MMFs -> to traders -> to crypto).
When such swindlers like SBF and Caroline Ellison both happen to have worked at any one entity that's part of that chain of trust that I mentioned, then said entity can't just wash its hand saying "well, we checked out on them, they were fine when they used to work for us", it doesn't work like that. People will start asking themselves: "Are there other swindlers now working for JS that JS has failed to catch during its vetting process? If yes, do they risk bringing the whole JS house down?".
All the while the IBs and the algo traders and all those fancy financial shops will keep saying: "how could we have known? We're not mind-readers! These are not our people!". Madness.
Also, by "JS risk control" people I was not only thinking about the spreadsheet guys. I hope to the gods of Mammon that there still is some sense of "is this guy trustful? Does he belong in this trust-based industry?" active inside of those firms, and, no, I don't expect the spreadsheet guys from credit risk to be in charge of it.
If you're telling me that "no, there's no such department in any of those institutions! Any crook can get hired as long as he passes the technical interview" then I think the industry has a whole has a big f.ing problem.
Jane St is fully above board and has no such associated firm managing customer money.
Unless they use leverage, which they all do. Then, they can easily lose their lenders (or options buyers, etc.) lots of money.
They make money from the pennies in the spread, many many many times over. They are not making over-leveraged big bets.
I encourage you to talk to anyone who works in market-making finance.
Let's also try not to conflate "blowing up" with actual fraud. Traders are free to lose all of their own money, and doing so is not fraud
Furthermore, Jane St only trades their own capital - ie. not capital deposited by customers in an exchange and not capital provided by selling ownership stakes of itself on a public market. This is a clear distinction from Knight.
It's as if some guy just had a bunch of money, traded it and made some more money, hired a bunch of people to keep trading it, and it has made a ton of great returns and people are asking: is this a scam?
Who would it be scamming? The only suckers are this guy.
The practical version of Effective Altruism for most people is essentially "if you're well off, you should donate a chunk of your income to buying anti-malaria bed nets/deworming medicine/direct cash transfers for the global poor". I don't see how that could "sour" in your mind, seems like a fairly unreservedly good thing.
I want to point out that there are real people [1] being helped by Effective Altruism right now. Telling them "sorry, can't help you any more, some rich asshole in the US just committed a scam, and he claimed he wanted to help you too" just seems incredibly petty and cruel to me.
[1] - This is also a group that traditionally doesn't receive much attention either.
All the mainstream political suggestions for taxation/wealth distribution focus on correcting wealth inequalities within a rich nation. Very few (if any) suggest redistributing from wealthy western nations to the global poor.
Obviously AMF has been around before EA, the big difference is the additional amount of money it’s been able to deploy. I personally know many people (including me!) who started donating significantly because of EA.
Isn't it against EA ethos? Helping some people right now, right here? I read some posts about this movement, and from them it seemed like EAs are more interested in the far off stuff - developing benevolent AI, transumanism, space travel, gene vaults, terraforming, Mars colonisation etc. (there is nothing wrong with these activities). Because helping people right now is "just" altruism, not effective altruism.
> I read some posts about this movement, and from them it seemed like EAs are more interested in the far off stuff
You can’t really use that as a metric to judge the movement, since there’s only so much one can write about “donate money to AMF”, but you can write pages and pages about the far off stuff.
Jane Street - NYC
EA - Berkeley
Crypto - the Bahamas or something?
VCs - Palo Alto
```Palo Alto (/ˌpæloʊ ˈæltoʊ/; Spanish for "tall stick") is a charter city in the northwestern corner of Santa Clara County, California, United States, in the San Francisco Bay Area``` - https://en.wikipedia.org/wiki/Palo_Alto,_California
>"Before joining Alameda as a trader in March 2018, Ellison spent 19 months as a junior trader at Jane Street after graduating from Stanford University with a bachelor's degree in mathematics in 2016. In a podcast two years ago, Ellison explained that Jane Street was her first job out of college. A diehard mathematician and Harry Potter fan born of two economists, Ellison she hadn't wanted to go into trading but "just didn't really know what to do" with her life.
> "She was persuaded to join Alameda by SBF, who also previously worked for Jane Street. When she quit Jane Street, Ellison said she felt bad for staying such a short amount of time. However, this feeling quickly dissipated when she arrived at Alameda and discovered that she had "kind of more trading experience than a lot of Alameda traders," anyway."[1]
And similarly for Constance Wang the FTX CEO/COO:
>"Constance Wang joined FTX as chief operating officer in the Bahamas in 2019. Initially, she was chief operating officer (COO) of FTX's crypto derivatives exchange. In January 2022 she was promoted as CEO of FTX digital markets, with responsibility for the Bahamas HQ. An org chart published by the Information puts her one level below Sam Bankman-Fried.
>This looks like a big job. All the more so because Wang is only a few years into her career. Before she joined FTX, most of her time had been spent at Credit Suisse in Singapore.
>Wang wasn't an MD at Credit Suisse. She wasn't even a director or associate director. She was an analyst and she worked at the bank for two years, first in KYC in the private bank and then in APAC risk and controls. It was her first job out of university.
"Admittedly, Wang didn't go straight from Credit Suisse to FTX - there was an eight-month detour to Huobi Global, a crypto exchange in Singapore first. However, the fact that this was sufficient to land her a job in her late 20s running 'institutional clients servicing and operational procedure,' at a fund with $1bn of revenues last year, looks slightly questionable."[2]
[1] https://www.efinancialcareers.com/news/2022/11/caroline-elli...
[2] https://www.efinancialcareers.com/news/2022/11/constance-wan...
https://www.theguardian.com/books/2022/nov/14/ftx-crypto-kin...
More likely is that the child of prominent academics might actually be more intelligent than average themselves and certainly provided more opportunity to flourish.
> Jane St (unlike customer-facing finance firms, like Goldman Sachs) does not really engage in this style of nepotism hiring that I know of.
Wow i'm sold.
I promise you I have no affiliations with JS whatsoever, just think that there is lots of sloppy reasoning going on in this thread.
Makes your claim unconvincing though. At least if you had worked there you might be in a position to make a claim either way.
The class of people hired by firms like Goldman Sachs is obviously nepotistic in nature and very different from the class that JS hires.
A substantial portion of the GS mix is athletes & what I would call traditional Northeast elites, Jane St hired mostly out of the top physics, CS & applied math classes I was in.
Beyond that, having parents who are prominent professors is nothing special at these schools and definitely would not give you pull at these institutions. Finally, Jane St has no incentive to engage in this sort of hiring because they are not customer/client facing.
I'm confused as to what you are asking - Jane St certainly hires plenty of people out of college not for nepotism reasons.
The fact that he did not have a prior job before college is not evidence he was hired for nepotism.
Let me guess - he also got into MIT through nepotism as well.
I'll let others decide on whether they find that reasoning convincing!
I know kids who definitely got in because of parents money, but it certainly did not impact their grading.
What grade inflation really means is that for many, if not all, majors at a school like Harvard, you can take a path of classes that will end up with you completing your major and having a high GPA.
That said, there are certainly classes that will be much less nice to you when grading and have a self-selected group of students. My guess is that if JS has enough people from, say, Harvard, they will know the difference between a student who took hard upper level courses to complete their major vs. just the simple basics.
In terms of why this grade inflation is so prevalent, one reason I think is that faculty want to have students in their courses/run a "superstar" course, and students select classes with the easiest grading policy. Schools like MIT (and Princeton as well) specifically combat this and so are known for grade deflation.
It seems entirely reasonable to me that Jane Street would consider a Bachelor's degree from MIT in math or computer science, being clever, and a prior internship at Jane Street as qualification to work at Jane Street.