FTX Founder Sam Bankman-Fried (SBF) was a guest last week on NBA star Andre Iguodala'sPoint Forward"programme. This interview is different from previous discussions on the market. Iguodala digs into some of SBF’s background and history. For example, SBF thought he would become a scholar when he was a child.
Point Forward is a podcast with NBA Warriors star Andre Iguodala that spans sports, business, and tech topics. In addition to being a player, Andre Iguodala is also a well-known investor in Silicon Valley, specializing in investing in technology innovation. His most famous investment, video conferencing software Zoom, nearly doubled his net worth.
At the same time, Andre Iguodala is also a financial mentor for many NBA players. In addition to giving some investment and financial advice, he will also hold conferences like the Players Technology Summit to help athletes better understand the investment potential of the technology industry.
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The SBF who thought he would be a scholar when he was young
It is well known that SBF's parents were law professors at Stanford University, which made Iguodala wonder if SBF's upbringing was different from other children.
SBF said that his parents did not instill in him how to think when he was a child. Instead, he would observe his parents and his colleagues on issues, including political and business issues. When he grows up, SBF will start to check Wikipedia and blogs on these issues to explore his views on these things.
When asked if he was under pressure, SBF said that his parents did not put any pressure on him, but he would put pressure on himself, thinking that since his parents are both law professors, he might become a lawyer or a professor in the future.
One thing is for sure, though, that parental values greatly influence SBF:
"They didn't tell me how to do things or how to think, but I started to get in touch with the thinking of legal people very early, such as how to think and how to interpret politics.
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Why MIT?
Iguodala next asked SBF why it chose the Massachusetts Institute of Technology (MIT).
SBF laughed and said that he actually didn't know why he chose. In his subconscious, he may think that he will be a professor of physics or mathematics in the future, so he chose MIT, which does not really have any profound connotations.
But after entering MIT, he found the school spirit of MIT and the difference between the students around him and other universities.
Most students from top universities have strong ambitions, and MIT is a research-oriented university with technology in command, so naturally many students arenerd, geek¹, has a strong nerd culture and academic atmosphere, which is very different from other universities. And he had a great time at MIT with these people.
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Want my money? Still want my people?
The MIT period was also the time when SBF gradually formed the "effective altruism" thinking.
SBF said that in fact, many people have some effective altruistic thinking.
For example, when everyone chooses a career, there will be some "how my work can make people around me better"; but some people put this concept as the first element and hope to exert their influence as much as possible.
"I started to explore effective altruism when I was a freshman, which made me start to think about the blueprint of my future life and what career to choose.
I understand that what I want is not to do good things by the way, but to make "making a difference to make the world a better place" the number one priority. "
If this concept is divided into "effective" (effective) and altruism (altruism), then MIT actually attaches great importance to the concept of "effective", but altruism belongs to a small group of people.
However, in the global community, there are many people who are altruistic like him, so SBF actually began to explore the concept of altruism in the community outside the school.
By chance, SBF came into contact with 80,000 Hours, a non-profit organization that pursues effective altruism. In this organization, some seniors thought that maybe SBF should think about what kind of work to make the most money.
And he got the same answer from some charities.
"I asked a few charities if they wanted my time or my money, and basically the answer I got was my money.
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Don't understand Bitcoin, but earn first
After leaving Wall Street, SBF actually didn't know the future direction, but he founded the Alameda Research Fund by himself. This period was around the beginning of 2017, just in time for the first big explosion of cryptocurrency.
“Bitcoin went from $3,000 to $20,000, and the masses first took notice of cryptocurrencies in 2017. Everyone is paying attention to the crypto space, and almost all of your friends are talking about cryptocurrencies.
For myself, I see very strong signs that there will be a lot of demand in the encryption field, the industry will change rapidly, there will be a lot of transaction volume, and at the same time, I guess this market may be very inefficient. "
This is because there were no institutions to provide liquidity at that time, and there was no very effective arbitrage mechanism, but it is certain that there will be a large trading volume and large price fluctuations. For traders, this is a good opportunity.
However, he also admitted that he did not understand the technology or connotation of Bitcoin and blockchain at all at first.
“When I first started trading cryptocurrencies, they were numbers to me. I thought about it very simply, there would be a price difference between exchanges, one might be $7,000, another might be $7,200, it might be There is a 3% arbitrage space.
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Did you realize you wanted to lead the company after you started the company?
It seems that FTX and Alameda Research have their own company culture, and the rapid rise of FTX also proves that SBF is a competent leader. Iguodala asked how SBF did this.
SBF responded that, in fact, he never thought of this situation at first.
"I founded Alameda just to trade, find opportunities, make deals and make money, you know, so Alameda was really just a two-person company in the beginning."
After entering the encryption field, SBF found that there are many opportunities here, but the transactions are quite complicated, so he needs to hire more people and use a larger team to execute. At this time, he did not expect to lead everyone.
“At first I didn’t realize that I needed “leadership,” I just thought there would be a lot of opportunity in this area. But these jobs are complex, so I’m going to hire people to do these jobs, and I can answer their questions, give advice, help They picked it up. All of a sudden, I realized it was a bit more than an employment relationship, and I became more of a project leader.”
But at this time, SBF still didn't regard this as company management or team culture. He just thought it was the right thing to do together. Doing the right thing together is also his early leadership philosophy.
Iguodala added to SBF's claims. He believes that SBF has shown his thinking on the company's future core direction at this stage. This is actually what he learned during his career as an athlete. The philosophy and attitude of a team leader will affect the entire team.
SBF believes that it is important to help the team establish a company philosophy.
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Cryptocurrencies are awesome, but exchanges suck
After starting to trade cryptocurrencies, SBF came to understand why cryptocurrencies are on the rise. He said that during the transaction, the problems encountered were not related to cryptocurrency transactions, but other matters, such as account opening and remittance.
Originally, when he was trading on Wall Street, he just pushed the buy and sell buttons. He thought that this is how the world works, but he didn't realize that trading assets was actually a privilege.
Just like arbitrage on exchanges in different countries, not everyone can do it, and a large part of it needs to rely on relationships and some kind of chartered industry.
Cryptocurrencies are open to everyone, and that's the beauty of it.
While cryptocurrencies are fascinating, there is another problem: exchanges are horribly difficult to use.
"In 2018 and 2019, as long as the price fluctuated too much, the exchange would go down because they couldn't handle the sudden increase in trading volume. At that time, the exchange had almost no "compliance department" and no cooperation with regulators. communicate.
After using the exchange, you will find that the exchange is really an important infrastructure in the encryption field. Second, they are a terrible experience to use. "
As with previous arbitrage, SBF saw an opportunity. For him, an industry with a transaction volume of billions and a network that can be used by people all over the world, but as an important hub, the execution effect and user experience of the exchange are so poor, so there is FTX.
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Winter in the capital market
Unsurprisingly, Iguodala asked about the current state of the crypto market.
SBF believes that this decline was caused by a reversal in monetary policy. Over the past few decades, the general environment has been in a state of easy money, which has caused many asset prices to continue to rise. In addition, the indicators used by the central bank to evaluate inflation in the past, such as CPI or PCE, could not fully reflect inflation.
The situation this time is due to the combination of many reasons, including the new crown epidemic, the Ukrainian-Russian war, and supply chain problems. Under the influence of multiple reasons, inflation has gotten out of control.
The Federal Reserve launched the largest rate hike in nearly 30 years to combat inflation, causing extreme panic in the financial market. So it’s not just the cryptocurrency market that’s in crash mode, the Nasdaq is down as much as 30% or more from its highs.
The market crash further led to a large number of liquidation and liquidity risks in institutions such as Celsuis and Three Arrows Capital. SBF believes that Bitcoin’s drop from $25,000 to $20,000 range was mainly caused by liquidations.
But SBF also pointed out that the worst may be over. He believes that in the short term, the encryption market will be affected by the overall economy, and in the long run, it is whether the industry can continue to develop good products.
“So the next development of the encryption market depends on how the overall economy develops, such as inflation rate, interest rate, Ukrainian-Russian war, etc. I think this is a short-term change in the encryption market.
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How to balance regulation and decentralization?
Before discussing regulation, SBF believes that the encryption industry can develop in two directions. One is self policing, and the other is that the community will start to structure education.
Self-regulation can provide users with a degree of transparency and self-regulation. Once crypto start-ups realize the need to provide self-regulation, people will believe it, which will greatly reduce the possibility of fraud; on the other hand, community education is also very important, and the two complement each other.
As for how regulators will respond, SBF has no answer. However, he believes that it is more likely to regulate the "front end", that is, those trading platforms or those platforms (interfaces) that sell encrypted products to ordinary investors, requiring them to be transparent in information, transactions, and investment users. Responsible.
But for the back-end operation method, SBF believes that it should be more open.
Taking modern international transfers as an example, he pointed out that the current regulation is more biased towards back-end regulation of transfers.
When transferring money, there may be three or four banks handling it. It takes a lot of time for these small banks to figure out who is transferring the money and where the money is going. However, these banks may not be able to figure out the situation. International remittances other than small amounts are very inefficient.
Iguodala is happy with the SBF metaphor, which he likens to "sweet jazz" (a style of jazz).
Finally, Iguodala asked why FTX cooperates with many athletes or teams.
SBF said that many people may think that FTX wants to get more users, but this is not the reason why FTX cooperates with athletes. If it is to get users, he will spend money on Facebook or Google ads.
The reason for choosing the field of sports is to establish brand value.
He believes that sports are one of the few fields without borders. Cooperating with these athletes or teams can help the public quickly understand FTX and know the core purpose of FTX.
"Our biggest goal is to tell the public who FTX is, what kind of services we can provide, and at the same time increase the visibility of FTX in the industry. We have begun to focus on building a relationship network and the public's brand image of FTX.
So thinking about it from this perspective, the sports field is one of the few industries that has huge influence and can help us deliver messages to the public. "
