Hacker News Reader

Comment by SkyMarshal | Hacker News Reader

That's been my impression of SBF since FTX collapsed. Quite book smart, but zero experience in building a major service that custodies billions in other peoples' money.

Raw intelligence is not enough in that context. Ideally you want to have apprenticed for at least a few years at a real exchange or custodial service. Somewhere you learn all the engineering details about how to architect it with proper financial controls, safeguards, and correctness guarantees so that this kind of failure cannot happen, either via human skullduggery, mistakes, or system bugs or security vulnerabilities.

Sam never had any of that. He probably got caught up in the moment, implicitly assumed he was smart enough to compensate and not need it, that money is fungible and free-flowing and he can move it around and always make more, etc. And his investors were all finance guys overly impressed with his trading ability and ignorant of the above. This is the unfortunate but unsurprising result.

View on HN

It had nothing to do with engineering issues / risk. He was a scammer.

This is it exactly. He was running a confidence game. There are some big parallels with Bernie Madoff in fact. Spinning a story of financial genius out of a lucky break he got early on that had higher than typical returns, but in a market small enough to fly under the radar of the big players. The big difference is that SBF had less sense and let it spin out of control way too fast and hastened his own demise. At least Madoff got to live most of his life before he got sent to jail.

I don't think SBF was a scammer in the Bernie Madoff sense. I don't think he set out to intentionally scam anyone. I just think he was so arrogant that he thought he could do whatever he wanted. He thinks he's smart and the rest of the world is dumb. He thinks the legal system is just something to "route around." Not because he wants to steal money but because, if there's money in "his" account, does it really matter if it technically belongs to a customer? He seeemed genuinely surprised at the verdict, and he's acted all along as if he were, not exactly innocent but undeserving of all this bother.

Yeah, Madoff was a scammer, SBF is a megalomaniac. He thought he couldn't fail, and thus the rules didn't apply to him. So, when he did (predictably) fail his reaction as basically a big "I didn't mean to do anything wrong, therefore I shouldn't be punished" makes sense. But hey you know what, this is why we have rules. Not following the rules was actually the wrong thing, not losing people's money, which--crucially--he couldn't have done had he followed the rules.

I feel like justice is being done here, but there's a sense in which SBF and his cohort are the victims here. A world of zero interest rate incentives/people, a trendy money machine in crypto, a general sense that old people/regulations are impoverishing us all with their nervous sclerosis, all created an environment where--in hindsight--this was inevitable. If not FTX then someone else.

I think people are 100% right to call out the press/publications/investors/regulators who flat out encouraged this charade to continue well beyond the point where it was an obvious scam, and I think we really need to examine the VC culture of "find (or create) a young megalomaniac, give them tons of money, ... profit". How do we think these things will turn out? Will we spend billions of dollars building Uber, which at this point is an app that shows you ads and incidentally hails a cab? Will we spend billions of dollars building trash companies that scam people? Will we spend billions of dollars building Airbnb, which was pretty ruinous for cities and at this point not even a good business? Will we spend billions of dollars building e-scooter companies that exist essentially to create tons of e-waste that litters our sidewalks and landfills?

It's nuts. Please just fund day care.

Yes, I agree with that.

It's undeniable he committed fraud, repeatedly lied to his clients and tried to make them give him money by telling them tales that weren't true.

But it also seems likely he thought he was clever/lucky enough that it would all work out in the end.

That makes the intent different, and culpability is always about intent.

In fact SBF reminds me more of Billy McFarland (of Fyre Festival fame) than of Madoff.

>It's undeniable he committed fraud, repeatedly lied to his clients and tried to make them give him money by telling them tales that weren't true.

What on earth is the difference between this and Madoff?

>But it also seems likely he thought he was clever/lucky enough that it would all work out in the end.

What on earth is the difference between this and Madoff?

>That makes the intent different

Why do you assume bad intent in one case and none in the other? SBF stole customer money and used it for political donations during one of the most heated, divisive, controversial elections in recent American history. He's the sitting President's largest donator, and he's going to prison for fraud. The potential consequences here are massive.

There's a possibility that the customers of FTX recover most or all of their money, thanks to SBF's investments.

Those investments were fraudulent because they were made without the consent of the people providing the money, but they were investments nonetheless: SBF was buying assets, not just pissing money away in jets and catering (although he also did that).

In Madoff's case there were no assets at all. It was not possible for Madoff to convince himself he was doing something that may become viable, given enough time. It was possible for SBF.

I think that's a pretty big difference.

(Also, campaign finance violations are not part of the trial that just ended, at all.)

SBF strikes me as someone who firmly believes ends-justify-the-means, and as such, if all his victims could be made whole, then he couldn't have committed any fraud. However, Matt Levine put it best:

> You cannot apply ordinary arithmetic to numbers in a cell labeled “HIDDEN POORLY INTERNALLY LABELED ACCOUNT.” The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison.

How does using a random number generator in sizing the insurance fund fit into that view?

Like every other decision SBF would prefer you not examine: It fits because the ends justify the means.

It's important for the business that the insurance fund is safe. If you look closely you will find that it is unsafe. But if people believe it is safe you won't need the insurance fund, so do whatever you need to to inspire confidence in the insurance fund.

The safety (or not) of the insurance fund is not related to the need for it. The need would come from a counterparty defaulting - which is generally unrelated.

FTX had "infinite money", so the actual insurance fund was that supply of money; having a pretend number on the front page was simpler than actually implementing it; in a sense it was a favor to investors, because it saved on operational costs.

(All things SBF may have told himself.)

That's typical startup shenanigans, not specific to FTX. Lying to customers and embellishing the truth is business as usual. I'm sure they hoped that at one point they'd turn this into a real insurance fund.

If that is the case then the standard operating procedures of startups is fraud, not that Sam isn't somehow a deliberate scammer and con artist.

That's the thing - he successfully ran a lot of involved arbitrage and other legitimate trading tricks before he decided to run the confidence game. Unlike Madoff, he could have retired before the FTX scam with "buy a jet every year" kind of cash.

Is there actually good visibility on the profits of the earlier trading?

He found a niche in a Japanese exchange that was difficult to break into due to onerous banking regulations. Made a nice little chunk of change but it was a small potatoes thing. The numbers only look big because it was early days of crypto and the inherent inflation was through the roof.

There's indication it was in the higher 9 digits.

Anyone, who gets into building a company in the crypto space is a scammer. Period.

I think that's either untrue, or at least there are different levels of scaminess. I put some money into FTX to short Celsius (another scam) and would have been happy with the service if they hadn't gone and stolen my money. I mean you could argue that any trading of crypto is inherently a scam but there are some consenting adults who chose to do it.

"...would have been happy with the service if they hadn't gone and stolen my money."

That's a pretty big caveat, though.

I am talking about people who "build" these exchanges and platforms and new protocols and shitcoins. Anyone peddling anything under Web3, DeFi, Blockchain, NFT etc is a scammer. People who think they are trading or investing are the suckers.

That's a bit spicy. Don't forget we're on the Y Combinator forums, so this may read as an attack against their investment strategy - not even dang can protect us here.

This forum actively supported deplatforming crypto source from VCS hosts so I'm pretty sure it being YCombinator doesn't matter at all.

Putting money into crypto is not investing. It's gambling.

There is a very fine line between fraud and financial engineering. Perhaps none at all.

Yes, but he crossed the fine line by like 500 kms.

It had to do with lack of internal controls that safeguard the organization and its custodied assets from both employee mistakes and fraud. That's a part of engineering high-assurance high-integrity systems and SOP at big exchanges, banks, and similar orgs.

SBF has just been convicted of committing intentional fraud, not just "lack of internal controls". Was it an oversight to use rand() to generate your deposit insurance figures, or add that switch to allow Alameda unlimited rights to dip into the customer fund kitty?

Lack of internal controls will cause some peon that you employ to steal money from you/lose your money.

Lack of internal controls isn't the reason for why the CEO and owner of FTX is funneling billions of its customer dollars into a company he owns - Alameda.

It's just straight up fraud.

Loose, or rather non existant, controls also allow you, as senior management to get away with even worse fraud without one of your employees realizing.

He's not senior management. He's the owner. It doesn't matter what your controls are, if he wants you to eat paste and hand him over the keys to the production database so that he could delete it, you can comply, or he can fire you.

You should probably let some other adult, (and the FBI) know if the owner asks you to do that, but you can't physically stop him. It's his company. He has complete power over it. It's not a democracy, there's no checks and balances on the power of an owner-CEO.

That's what internal controls are there for to prevent. Especially for owner-CEOs. FTX set up shop somewhere in the carribean just to avoid that kind of oversight and control. I can hardly imagine a bigger red flag than that.

That people just accept that founder CEOs are allowed to do everything with their companies, and their companies money, is troubling. Because, as soon as said company is a seperate legal entity, it is the companies assets and not the founders anymore.

Maybe even CompSci graduates shoupd get some basics of business, legal and ethics during their studies.

> lack of internal controls that safeguard the organization

That's a bit like:

"The bank robbers' mistake was a lack of internal control and security advisors who could have safeguarded them from robbing banks"

It sounds silly but you are not a bank robber before any attempted robbery or at least sincere planning of such.

Yeah but if you want to scam why would you want to engineer the company you are creating to prevent you from scamming.

That's true of course, but every control can be turned off. In this case, they wanted to turn every safeguard off.

Maybe the rubes can be exonerated for falling to the incessant hyping of crypto but a smart person should know all crypto is a scam because the Washington Post, the bloody Washington Post told you it's either a Ponzi or a pyramid scheme in 2015. In 2017 you had Preston Byrne challenging that article in that he considered the scam to be significantly different from a Ponzi and gave it a new name, a "Nakamoto scheme" (as an aside, Jorge Stolfi will continue the debate in 2020 where he considers the difference not to be significant and I find his arguments to be rather convincing). But he didn't, not for one second, challenged the fact it is a scam. Attack of the 50 Foot Blockchain came out in July 2017. There's no way to enter the crypto space without mens rea in 2019.

As someone who’s never been into crypto, the general discourse when I look in crypto-related subreddits suggests that the very fact that mainstream media were calling it a Ponzi scheme is one of the reasons you should invest in crypto.

It’s that “one simple trick (what they don’t want you to know)” kind of predatory advertising that seems to be what ensnares people.

It’s adjacent to the hustle culture you see on social media where people with gleaming white teeth tell you they’ll make you rich

As someone who made lots of money on crypto early on, then didn't touch it for many years, made lots of money again and haven't touched it since I can tell you (and others) what is a winning strategy for "investing" in crypto.

Consider it a VC investment. First, you gave to either understand the underlying technology, or someone you trust have to understand it sufficiently to be able to say "this is bullshit", or "this is a great novel idea that makes a lot of sense".

Then you invest a bit of your really disposable income in it and don't touch it for a couple of years. Eventually you sell once you're happy with the price, or you forget about it and check few years later.

Edit: also, it really is down to luck too. An idea might be great, but the people behind it can be scammers. Etc. Crypto is(or was) a very high reward, very high risk game.

And for God's sake don't invest your life's savings in crypto!

It's not an investment. You are gambling. And even worse, you are gambling by robbing the less informed. Make no mistake: every cent you made is a cent someone else lost -- even if they haven't realized their loss yet, it's there. And even worse, it's not a cent, it's a bit more because bitcoin is not even a zero sum game but a negative sum game and those are inherently scam. But, I guess, good for you?

It's effectively a pyramid scheme in which the potential marks are everyone in the world. It's not that much of a surprise that crypto continues to have money pumped into it - there's an almost never ending supply of greater fools.

Arguably the entire monetary system is also kind of like that - but it's got the benefit of true utility outside of speculation. It's a shame that most of the interesting crypto-as-money stuff - smart contracts, accessible to everyone financial APIs, pseudo-anonymous payments etc, has been completely dwarfed by the crypto-as-investment situation. Maybe it'll shake itself out long term, but I suspect the fundamental problems of unregulated "money" will be inescapable.

It turns out there's a reason we have financial regulation.

> It's effectively a pyramid scheme in which the potential marks are everyone in the world.

That's about as big as it gets, and pretty well explains the long legs this con continues to have. A lot of marks out there.

The only thing bigger would be an interstellar "galactic-coin". God. I can only imagine the carnage. Seems like a great premise for a sci fi story.

It has real value for as long as there are people who need a currency that isn't controlled by a government. In other words, it's an investment in the working capital of the criminal underworld. (and tinfoil-hatters) The money you put in is probably used to commit crimes of some sort, and the money you take out was probably the result of some crime. But with coins like Bitcoin that have a distributed trust in all miners to maintain the algorithm, I don't think you can say it's a scam.

The ones I think are truly scams are the "stablecoins" and "exchange tokens", which are nothing more than a fiat currency offered by an entity smaller than a government with less accountability than a government, and no way to ensure the value/supply/demand of their coin. So yes, I think FTX was a scam to the extent that they traded FTT while printing or consuming it however they liked.

Very funny, did you loose BTW? Every "investment" is a gamble of sorts. And how can it be gambling and a ponzi scheme at the same time?

Also I did put investment in quotes. I don't consider it an investment like stocks of a well established company, but if you put money in a security and you can reasonably expect some return at some risk it is an investment.the main difference is that with gambling you play against "a house". A single entity that controls "the market". With crypto, you can take your security and sell it to anyone, or buy stuff with it.

And no, I haven't robbed anyone, I haven't forced anyone into it to buy at gunpoint. I haven't bought in by using secret knowledge. And If you think crypto is both a gamble and a ponzi I wonder what do you think about forex. If anything that looks a lot more like betting as 99% of forex "brokers" don't actually buy/sell for you, but you bet against them.

On Forex I lost £3500 when the UK brexit referendum went the other way than I predicted. Was I "robbed". No, I made a bad "investing" decision.

Have you never lost at a stock market either?

> First, you gave to either understand the underlying technology, or someone you trust have to understand it sufficiently to be able to say "this is bullshit", or "this is a great novel idea that makes a lot of sense".

> Then you invest a bit of your really disposable income in it

Sorry, but I find it a bit funny that in your "winning strategy" you seem to invest on the second step regardless if you in the first step ended in the "this is bullshit" or not. (full disclosure, so far, every crypto thing I have seen has fallen to the "this is bullshit" bucket in my opinion. But I guess my "if it looks, walks and smells like bullshit, don't touch it with a ten foot pole" is not a winnig strategy.)

>Sorry, but I find it a bit funny that in your "winning strategy" you seem to invest on the second step regardless if you in the first step ended in the "this is bullshit" or no

Perhaps this is my failure to express this clearly, but I thought it obvious you don't invest if you think it's bullshit.

Well, yeah: If it's bullshit, you invest and then make sure you spread the word so there are enough people under you in the pyramid to keep you solvent.

Haha, very funny. I thought its obvious you don't invest if its bullshit. Also the whole point of using disposable income is that even if it tanks you stay "solvent". And no, look through my decade long comment history and you'll see not a single instance of me promoting crypto to anyone. In fact I actively discourage people who are looking for real investment from it.

Try the /r/buttcoin sub for a more informed opinion.

This critique is basically saying that cryptocurrencies have Ponzi-esque economics or more aptly named greater-fools economics. The argument being that as they have no cash-flows, any appreciation must come from future investors piling into the asset. I think this is a great optic to look at the problem as it focuses on the economic design, its sustainability, and its valuation in terms of future cash-flows.

Nevertheless not all cryptocurrencies satisfy the above. The prime example being Ether. In the last year it has experienced -0.186% circulating supply inflation (i.e. it's non-dilutive to its holders) [1]. While the network has captured around USD 6.5M per day ~ 2400M per year in fees due to its usage as settlement layer which are paid to its stakers. Basically, it's cash-flow positive and does not rely on greater fools to sustain its economics.

[1] https://ultrasound.money/ [2] https://charts.coinmetrics.io/crypto-data/?config=JTdCJTIybm...

What you are saying is you can invest Ether (i.e., stake it) and then might earn a return in Ether (not USD). Any appreciation of Ether vs USD still needs to come from outside demand for Ether.

This is a subtle point but the fee revenues that the network observes are best understood as priced in fiat currency, even if denominated in ETH. In much the same way the earnings of Microsoft in Europe are to be understood as priced in EUR even if denominated in USD in their financial reports. The reason for it is basically that the network offers a service (transaction settlement layer) that provides some value to its users and has some costs. The cost is set dynamically due to the scarcity of blockspace to include transactions, if the cost is too high it will be outcompeted with all other alternative uses of that money. They may settle in a different chain, they may settle using a centralized provider (e.g. Visa, Paypal), they may not interact at all with the network, etc... This makes it so, at the margin, the network revenues are inherently priced in fiat. Because prices will be set at the point where use of the network is discouraged given the value provided and all other alternative uses of that money.

Additionally, the fees of the network can only be paid in ETH, which means that any use of the network implies ETH demand.

If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders.

Whether people transacting on the network care strongly about the costs vs alternatives to create a proper link with fiat is not so easy to show because there isn't always a direct 1-to-1 correspondence between services (and there are switching costs, too) - so the "inherently priced in fiat" is tough to show, I think. Also, being priced in fiat might still not create demand for Ether from fiat holders - that comes from outside demand as per the above.

> If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders.

Demand to settle a transaction on the network is demand for ETH. Because the base_fee of a transaction is burnt, destroyed, so ETH needs to be acquired to use it as a settlement layer. Much in the same way to how heating your house with a gas boiler is demand for gas. Similarly, when natural gas prices skyrocket (cue Ukraine invasion), alternative forms of heating start to look more attractive, and consumers may change their behaviors lowering the thermostats. In the case of Ethereum, alternative settlement layers will look more attractive or some users may lower their use. The same mechanisms are in place. I agree though that the relationship is not linear, that's not what I implied. Simply that the revenues of the network are priced in fiat, because the price is set by an auction to include your transaction on the scarce blockspace. And given at least some users will be sensitive to the price of the transaction in USD they will, at the margin, set the prices for a transaction in USD and therefore the fee revenues of the network.

By the way I appreciate you engaging rationally on this topic in HN. Not a common sight when discussing anything related to crypto but much appreciated.

Thank you, likewise, needs two to have a rational discussion.

I agree that there can be some link based on the utility of the network and with less of a speculative frenzy it might actually be stronger now. Not dissimilar perhaps to (other?) commodities, which have some link to economic activity but are not directly producing the activity themselves (and they can also have speculative phases). And commodities also have conceptual issues around their use in long-term investment for that reason (but at the same time they exist and trade).

>>> Did you fly to the Super Bowl in a private plane?

> all crypto is a scam

Most people think SBF spent all his customers' deposits on private jets and luxury condos, and blew the rest on shitcoin bets that went bad.

But despite the insinuations of prosecutors, the PJ trips just don't add up to much in the scheme of things, and the real estate is still there and can be sold.

Yes, some shitcoin bets were bad, but they're offset by investments that paid off like the Anthropic stake.

It's likely that the only haircut depositors will have to take is the billion dollars in bankruptcy lawyer billings.

> the bloody Washington Post told you it's either a Ponzi or a pyramid scheme in 2015

If you put in $10K when WaPo told you it was a Ponzi, you'd have $1.6M today.

Maybe next time the bloody Washington Post gives you investment advice, you should do the opposite.

> If you put in $10K when WaPo told you it was a Ponzi, you'd have $1.6M today.

This is the fuel that drove crypto. Yes it's a scam; I'm just hoping others will buy in after me and I can cash out with their money.

Oh, so stocks must be a ponzi as well.

Investment into a corporation becomes capital. It is used to buy resources which when combined properly can be sold for more than the raw cost. You are entitled to a share of these profits in the form of dividends.

On the other hand, buying crypto"currency" becomes ... just that. It sits there until you sell it to someone else.

In other words, if you rolled back all transactions in a stock ever made you'd end up with a positive sum totaling dividends paid out. If you rolled back all Bitcoin transactions you'd end up with a big fat zero. Minus, in both cases, transaction fees but while it's a mere convenience for stocks it's inherent in Bitcoin which makes it a negative sum game and as such a scam.

Unless you take part in a share emission, then no, investment in the form of buying stocks does not become capital.

There's a seller for every buyer, and the company does not care about it any more than having happy owners is good.

Investment in the form of bonds is another thing entirely, that's purely capital.

Clearly currencies don't pay dividends but doesn't matter for this argument. There's a fair chunk of people treating stocks exactly the way gp described. To conclude from that that all stocks are a ponzi is as retarded as it is to conclude all crypto is a ponzi

> as it is to conclude all crypto is a ponzi

Yet we didn't conclude only from this all crypto is a ponzi.

That all crypto is a scam clearly comes from the fact it is a negative sum game. When you have a game where you can tell which set of players in total are going to lose and which set of players in total are going to win without knowing the rules of the game -- that's clearly a scam. All you need here is any commodity with baked in transaction fees. The exact same would be true if you traded with plastic poker chips but you needed to pay someone a fee whenever you bought or sold one. Indeed, reviewing the process with such chips makes it more clear, stripped of high tech mumbo jumbo.

Stolfi argues all crypto is a Ponzi because 1) people invest into it because they expect good profits, and 2) that expectation is sustained by such profits being paid to those who choose to cash out. However, 3) there is no external source of revenue for those payoffs. Instead, 4) the payoffs come entirely from new investment money, 5) while the operators take away a portion of this money. Our argument in the previous section was 3-5, you need to add 1 and 2 for it to become a Ponzi. https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-pon...

Who's we? Cause I didn't see gp making this point.

The little club derisively called "crypto antagonists", I guess.

Is crypto not a ponzi as an investment, though? Who in their right mind buys currency and sits on it as an investment? If it has utility as a currency, then use it as one, otherwise it is just speculative, and a speculative investment which relies on other people to buy out your stake and has no positive cash flow is a ponzi. No?

Gold.

Y'all really should read Stolfi because he carefully addresses all these, gold stock etc

> gold has a source of revenue besides the investors; namely, the purchases by consumers like jewelers and industry, who take gold out of the market (2/3 of the production) for uses other than re-sale. When one buys 1 oz of gold, one gets a chip of a metal that one can sell to those consumers, and thus obtain some money that does not come from other investors.

This is simply mentally reclassifying "consumers" outside the category of investors.

The argument for crypto, etc is the same. There are consumers who want to make purchases, use contracts, etc.

No, it's saying that gold has value as a commodity as well as a currency. You can't melt down a bitcoin and sell it as jewellery.

The commodity use of gold is very minor. It's liked in jewelry not for its utility, but its prestige. So once again gold jewelry holders look an awful lot like investors. Just like how ETH enthusiasts do, even if they also use it to perform tasks with smart contracts.

Actually, all commodities and it is a known issue with commodity investments (which maybe are more like trading positions therefore).

Stocks are ownership of something real. The company you own a share of does things in the real world. They can make intelligent (or stupid) decisions about the company strategy. They can enter new markets, or launch new products. They can share a dividend with the owners.

Obviously there's still investment bubbles - but underlying it all is ownership in a corporation.

Not necessarily but some financial products based on stocks can be and meme stocks usually function much like ponzi schemes (i.e. buying a stock, telling everyone else to buy the stock because it'll go to the moon, then selling the stock before everyone else finds out they were the only ones adding value to it, forcing them to sell at a loss).

Stocks don't rely on other people buying in to create value. They are buying into something with underlying value.

That doesn't explain GME or BBY. Which have explanations, but I wouldn't call rush underlying value.

Fundamentals define a floor for stock price, but above that it's all vibes. Which is fine, as long as we're on the same page.

I'm not saying rush is underlying value.

The biggest and greatest of them all!

Tell me you lack basic financial literacy without telling me...

> If you put in $10K when WaPo told you it was a Ponzi, you'd have $1.6M today.

In 1999 Harry Markopolos had informed the SEC Madoff was running a fraud. Yet it took until the 2008 financial crisis for Madoff to be exposed. I am sure you've made quite some money if you invested with him in this time period.

> Maybe next time the bloody Washington Post gives you investment advice, you should do the opposite.

I did and I had significant losses. What does that say about your statement?

The price of Bitcoin in 2015 was ~$350. To have significant losses after buying at that price point would have taken very serious skill.

Could you elaborate a bit the "very serious skill" needed to store your bitcoin in e.g. Bitfinex or CuadrigaCX?

Since it's apparently not obvious, long term holding your coins in a centralized exchange misses the entire point of crypto. Not understanding that takes some skill indeed.

Oh, neat. So misplacing your hardware wallet also requires lots of skill. Gotta love that rugged libertarian individualism that turns bad luck into stupidity and good luck into galaxy brains.

You mean to say you didn't make any backups?

Each time it doubled you would have been a fool not to sell it.

Holding is about the same thing as buying but with no transaction cost.

It says the bloody Washington Post has no obvious skill at predicting the future, therefore any statements they make should be taken with a hefty dose of salt.

The article was not predicting the future, though.

https://www.washingtonpost.com/news/wonk/wp/2015/06/08/bitco...

> The thing is, I don't actually use it. I just hoard it. I'm waiting for some greater fools to push up the price by using theirs.

And what is this made up quote (not to call it a strawman, as the wapo is certainly a prestigious outlet with very high standards) supposed to prove?

you should have hodld

He wouldn't want a bunch of proper engineering because that would prevent him from betting with billions of customers' deposits that were supposed to be safe.

You don’t need a few years’ apprenticeship at a real exchange or custodial service to know that exchanges are not permitted to gamble with customer money, to spend it on private planes or arena naming rights, or to allow your other company to go into millions of debt.

He was a Jane Street trader, he's not new to high finance.

Trader != exchange engineer.

IMO his downfall was thinking that he was smarter than everyone else. When you think everyone is a rube, you think you can get out of the mess you are in by just explaining yourself, writing a bunch of blog posts and tweets and going on a media blitz. And in the process of doing all of that he just dug the hole he was in 10x deeper.

> He probably got caught up in the moment, implicitly assumed he was smart enough to compensate and not need it

The pop psychology term for this is the Dunning-Kruger effect.

Not really. The Dunning Kruger effect was that those in the bottom quartile of competency greatly overestimated their own competency. He wasn't incompetent. Just had good old fashion hubris.

The person I'm responding to was making the case that he was incompetent at his job:

> zero experience in building a major service that custodies billions in other peoples' money.

This is exactly what the Dunning-Kruger effect describes. He was incompetent at the task he was doing and didn't know enough to be aware of his incompetence.

No, it's a specific phenomenon about lack of raw cognitive competence, like for general tasks in life, not lack of experience in a given domain. The point of the DK effect was even with experience, the disparity between ones competence and awareness of ones relative competence doesn't improve. The original paper opens with an anecdote about a bank robber that couldn't believe he was caught because he "wore the juice" — he was under the impression that lemon juice would make his face invisible on camera.

What you might be thinking of is the smbc Mt. Stupid diagram [1] which does relate overinflated sense of know-how to a relatively low experience level.

That is distinct from the DK effect in important ways. Of course it doesn't help that if you google images for DK effect 19/20 first results will be a bastardisation of the Mt Stupid comic.

[1] https://www.smbc-comics.com/comic/2011-12-28

> No, it's a specific phenomenon about lack of raw cognitive competence, like for general tasks in life, not lack of experience in a given domain. T

This is a common misconception. Wikipedia has a pretty good write-up. Quoting the first paragraph:

> The Dunning–Kruger effect is a cognitive bias in which people with limited competence in a particular domain overestimate their abilities. Some researchers also include the opposite effect for high performers: their tendency to underestimate their skills. In popular culture, the Dunning–Kruger effect is often misunderstood as a claim about general overconfidence of people with low intelligence instead of specific overconfidence of people unskilled at a particular task.

The original paper [1] was explicit that this was domain-dependent.

> The point of the DK effect was even with experience, the disparity between ones competence and awareness of ones relative competence doesn't improve.

I don't think this is consistent with the literature. In the studies I'm familiar with, there is the classic Socrates effect that the people with the most skill are aware of how little they know and tend to underestimate their relative performance. So it improves significantly, but there's a slight over-correction.

Quoting the original paper:

> improving the skills of participants, and thus increasing their metacognitive competence, helped them recognize the limitations of their abilities.

[0] https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

[1] https://pubmed.ncbi.nlm.nih.gov/10626367/

Reply on news.ycombinator.com