← Go back Oct 10, 2023
Dear Subscribers, Today I wanted to share with you an exclusive 45 minute conversation with Michael Lewis on his new book, Going Infinite, which details the rise and fall of the former tycoon. Overall, I found it to be a familiar portrayal of the individual that I reported on for the past few years. It touches on many of themes that I wrote about in my 2021 cover story and in subsequent pieces such as his lack of interest in a traditional childhood, inability to feel empathy, limited emotional intelligence, his approach to crypto as a means to an end (I called him a benign mercenary back in 2021), and his stubbornness to submit to authority or accept the responsibility that came with running a multi-billion dollar enterprise. I know that a lot of the commentary about the book, and the dozens of reviews, have been negative. Critics (many of whom I suspect did not even read the book), were quick to charge Lewis with access journalism or being yet another writer to fall under SBF’s spell. I’ve spent enough time with the man to understand his unconventional charisma. I also understand the anger behind a lot of these charges, because many of these people fear that crypto is now on trial right alongside SBF. Crypto diehards did not like SBF being held up as the golden boy of the industry, and they are afraid that it might go down with him. But therein lies the irony with Going Infinite, and about SBF in general . It is not a book that is even remotely about crypto. As Lewis will show in my interview below, he explained everything that he thought the reader needed to know about crypto in a 150-word footnote. There is no chapter breaking down how a blockchain works. Even Lewis was surprised about how little he needed to know and write about crypto to put out the book. That does not mean that crypto had nothing to do with the SBF story. Of course it does, from Alameda’s reliance on FTT as collateral for involuntary loans from FTX customer deposits, to the fact that only in crypto can an exchange also own a hedge fund and act as a custodian. But one thing that is clear from the book is that crypto was the means, not the end. If readers are going to find anything missing from the book, it will likely be its lack of understanding SBF’s ultimate endgame and how it impacted key decisions during FTX’s last couple of years. What did he actually want? And what led him to make what appears to be a conscious decision to let Alameda put its hand in the cookie jar of FTX customer deposits? The final section of the book places the reader in rooms where furious FTX employees confront SBF multiple times to ask what happened, but they never get a satisfying answer. It ends with current CEO John Ray steadfastly refusing SBF’s help while trying to answer the same question. Lewis tries to get the answers, but they are left unresolved. A lot has been made about SBF’s early interest in Effective Altruism, a Silicon Valley-esque spin on philanthropy that uses Moneyball-type analytics to deploy money in ways that will provide the most good (a subjective term). I did not doubt Sam’s sincerity about EA during his early days, and he did donate a large portion of his salary at Jane Street before he got into the crypto world. But it is fair to ask, as Lewis does in the book, whether anyone can be fully sincere about a cause like this if they are incapable of feeling? I’m not sure that SBF knows the answer either. What did Sam really want? We may never know. Forbes: How much did you know about crypto before writing the book? Lewis: I owned a little bit of it, sold it. Over the years, kind of going back to about 2012, I was approached by crypto people who wanted me to write about them. I sat down and interviewed people way back then when it was just kind of catching on. I had two problems with it as literary material. Each time I kind of started to scratch the surface of crypto, thinking about writing something about it, I was put off by the religious fervor of the crypto people. They were selling me, just really hard, and I felt like I was being pitched. And I never really liked that feeling. I prefer the subject not wanting me to write about it. The second thing was, it just always seemed to me a solution looking for a problem. The first pitch was this is going to replace the dollar, then it's going to be the means of exchange. And it clearly was ill suited to that, and then the pitch changed to being the new gold or an uncorrelated asset. And I found myself kind of just generally more skeptical about it all. I was agnostic about it, rather than hostile to it. But until I met Sam, I didn't have any real deep interest in crypto. Forbes: And you first came across Sam following an email request from a friend who was looking to invest in him in September 2021 correct? Lewis: I'd never heard of Sam, and maybe a month after the email he shows up on my front porch. He wasn't that interested in crypto. I thought it was interesting that he wasn't a crypto religionist. He said that there was a 20% chance that this is all BS and it's gonna collapse. It was sort of like maybe this is something big, maybe we'll end up disintermediating the financial sector, but it hasn't done it yet. He wasn't completely dismissive that crypto and blockchain might play an important role. But he wasn't selling it. And he was sort of detached from it. He only cared about people trading it. Forbes: What percentage of Sam's story is a crypto story versus just a traditional financial fraud story? Lewis: Crypto enabled it, and crypto went so well together with Sam's sort of like anti-grown up answers to anti-institutional stuff. It is hard to imagine Sam happening the way he happened in the traditional financial sector. He wouldn't be able to create an exchange and be a custodian of funds, for example. If he created IEX or some financial exchange he would have been regulated more rigorously and would have been prevented from holding the funds. So the structures of crypto were important. Forbes: One thing that you said to me that I found really interesting was that you had to know a lot less about crypto and blockchain than you thought you would have to write the story. Could you expand on that? Lewis: It's right and it you'll see, I do it in a footnote. I put most of the explanation of crypto in one little footnote, or rather put a footnote to the reader saying that's all you need to know about crypto. If you told me before I met Sam, and before I got a story, you're going to write a book about this guy who does crypto, I'd have thought some big chunks in the book would have been explaining crypto. And there's some things I do have to explain, but much less than I thought. The big point is you're following this character, and you only need to know what the character needs to know. If you asked Sam at the point when he was trading at Alameda for an explanation of a blockchain, he might not have been able to do it. You probably could explain it better than he does. You're probably more interested in it than he is. It was a relief to me that I didn't have to do that much of that work. I didn't think of it as a crypto book. I thought of it as a book that happened to have occurred in crypto. Forbes: What would you say are like the two or three biggest themes in your book? Lewis: The role of trust in modern life, how trust is created and destroyed, and how vacuums of trust provide the opportunity to create new trust really fast. So trust is a really important thing that runs right through the book. And you see when you read it, that when he gets going, he is very self consciously trying to build trust and thinking about how you do this. The role of feeling, of human feeling, and emotion in nature, is one of the big themes that run through it, but Sam is so without feeling and so denatured and he's colliding with a world that doesn't really understand that. Over and over again is this conflict between this denatured person almost like an AI kind of thing with the world. That's a big theme that runs right from the beginning. And systems. Even before it all collapsed, I was thinking how would I write about this guy? What is the story? The story, in my mind was always this is very unusual character, who among other things was unendowed with a normal complement of human feelings, but had a lot of other attributes, was colliding with and stress testing all these systems, media, politics, crypto, finance, philanthropy, and then finally bankruptcy and the justice system. And so the vulnerability of systems and the weakness of various systems is like one of the big things that runs right through it. Forbes: I want to get your quick opinion on some of the key characters. Let's start with Sam's parents. Lewis: Delightful intellectuals who were kind of clueless about what their son was doing and kept at arm's length from the whole thing. Forbes: Do you really think they were detached? I'm sure you saw the FTX suit against them with some damning allegations. Lewis: It doesn't mean they're true. It's true that he gave them $10 million when he thought he had $22 billion. And it's true he bought a house and put it in their name. I know they didn't care very much about the house and they gave it back. The exceptions were a couple times when Sam or Alameda got in trouble. He brought his dad in to help him either sort through tax problems or help him negotiate with people who were angry with him. His mom was involved in his political life, and his dad was involved in his philanthropic life, like trying to figure out how to make sure that the people in the mental health facility in the Bahamas had more visits from people who love them. But the actual business, it was funny to watch. And this was really important, if you talk to Sam's scheduler and sort of personal hand, Natalie Tien, she was embarrassed by how Sam treated his parents. They would have to book a 15 minute slot if they wanted to talk to him. And oftentimes he would just bail. He wasn't accessible to them. When he was very accessible to me, and I would spend some hours with him, afterwards if I went back to the house they would ask me what he was doing. They were curious, because he did not inform them. He loved them, but it was sort of like, "Get out of my kitchen mom and dad." It had that kind of relationship. Forbes: Nishad Singh (former Director of Engineering) Lewis: Nishad was the least controversial person at the top of FTX. Everybody kind of liked him. If you didn't like Nishad, you didn't like people. Sam outsourced all emotional work to Nishad. Sort of like, "Manage the emotions of the employees. If they're unhappy, figure it out and listen to them, because I don't I'm not interested in their emotions." And Nishad did that. He ended up kind of like the guy in the Green Mile, who absorbs everybody's pain, like he was gonna explode at any time. He just seemed unbelievably stressed all the time because all the problems in the world, both technical and managerial, found their way to him. When he started, he had no life experience. He was a geek who didn't know anything about financial markets. So he is just along for the ride from the very beginning. Very sweet natured but shocking that he was in the position. Forbes: Caroline Ellison (former CEO of Alameda Research and Sam’s former girlfriend) Lewis: Unsure of herself with me. Very timid and uneasy in interviews. She sort of got her ego from Sam in some odd way, and she was completely in love with Sam for some stretch of this story. And completely pissed, not unjustifiably, by how she was treated by him. And way over her skis, trying to manage a big crypto hedge fund. Risk wasn't her thing. Forbes: Are there any sort of like unsung heroes are major players that have not gotten much attention? Lewis: One was Natalie Tien. She was there all the time. She was the only one who knew where he was at any given point in time. A guy named Ramnik Aurora, who was this kind of odd jobs person who ends up being in the room when they're talking about all the venture capital investments. He's really important. There was also a guy named Zane Tackett. Zane is kind of the soul of crypto, like old crypto, like he's an originalist. He conferred upon Sam by just by being a part of FTX a real credibility with crypto people and he's now furious. The moral center of the book is not Sam, it’s Zane. In the end Zane walks away from him and rejects him. Forbes: What are the biggest similarities or differences between Sam and the pantheon of characters that you've written about in the past? Lewis: They all have one quality in common, they're all really good teachers. He had been a great high school physics teacher, he just could do that. But some of it is just the way he bounces against the world, illuminates the world in a way that is not normally illuminated. But all of these characters are very different. If you put my characters on one spectrum, and on one end of the spectrum is totally straightforward, every word that comes out of his mouth can be trusted, nothing behind the words that you need to kind of dig into, that was Brad Katsuyama (IEX founder). Sam Bankman-Fried will be on the other. Forbes: What are your thoughts on exchange tokens? Lewis: Here's what I think is interesting about exchange tokens, or tokens generally. There is this tendency to think of them as all the same thing, but when people start making distinctions they'll say that bitcoin and ether are real and serious, but the other ones aren't. But there's lots of other distinctions to make. FTT, unlike bitcoin, or ether, has a revenue stream. I mean, it actually has a cash flow. There is a rule, and they abided by this rule, that roughly a third of the exchange revenues get used to buy back and burn FTT. So it's like, it's like a stock buyback program. So that's different from a token that has no cash flow associated with it. It's a really important difference. It's almost like equity in FTX. Now, the problem is that there is no guarantee that the company will keep doing these burnings? And people (even Sam) would say, that might just happen. He said, you just kind of have to trust us. Forbes: What do you think that the future of crypto exchanges looks like? Lewis: I'm really not good at predicting things. If had you told me the internet was going to happen, and that US stock exchanges were going to go from being basically neutral enterprises to these hugely profitable corporations because they could sell the data from the exchange to a handful of participants and give them an edge on the exchange, I'd say that's not going to that couldn't happen. But that's what happened. We live in a world where the exchanges are gold mines. That is unless crypto realizes its ambition of being this tool of disintermediation where people don't need exchanges. Exchanges have been the quickest way to get rich in crypto. All the richest people in crypto own exchanges, even people who've gotten put in jail, under house arrest, they still are rich. The holy grail for anybody in crypto is to start an exchange. The bewildering thing to people who really knew the markets who were inside FTX is why Sam and the leaders would jeopardize this gold mine. Forbes: As far as regulators, media, and investors go, were you in any conversations where they really kind of expressed skepticism about FTX? Lewis: Of course now there are people who claim to have said that there was something wrong at FTX and blah, blah, blah. There is this hedge fund manager who's gotten a little famous because he said all these nasty things about FTX right before it collapsed. As far as I can tell, not a single person knew what was going on. If you had it out for FTX, if you knew there was something wrong there, you really only had to say one thing, that depositors money is in Alameda. Nobody said that. The people at FTX told me that no one thought to ask the question, because it seemed so preposterous. They asked a different question. What are the conflicts of interest between Alameda and FTX? And they had in mind, especially the US investors, US stock market structure. They had in mind, “Oh, you know, various high frequency traders have privileged relationships or access to data on the stock exchanges, which allow them to pick off ordinary investors. Does Alameda have that on FTX?” That was the question. And they can honestly say no, and it was easy for them not to have that. Because in order to have that, I think this is true, that it really helps to have the exchange in a server in a building. And the trading on FTX happened in the cloud. The second question that I didn't think to ask, because I didn't think they'd be so stupid, is whether this great risk engine you created for FTX is applied equally to Alameda or is Alameda exempted from it? Forbes: And what about regulators? What were those conversations like? Because one of the things that I’ve written about in the past is the cognitive dissonance that required him to be pitching FTX as a safe, reputable brand, advocating for legislation while he freely admitted to me and other people that he spent zero time on compliance and risk management. What was it like with him in front of some of the legislators or regulators? Lewis: I was never in a meeting with a regulator with him. I was there in Washington when he would come out of the meeting. He always had an army of lobbyists with him, and Sullivan and Cromwell in some cases. But it's interesting. You're right. There was a cognitive dissonance there. I think he thought that the FTX model, the way of managing exchange was a superior way, especially when it came to margining derivatives customers. The minute he got the right to trade a bitcoin futures contract, he would have the right to trade in S&P futures. So he was arguing for a shift in the structure of the financial markets. And he felt like the CFTC was playing a game with the SEC over supervision of these new markets. He thought that the CFTC was very friendly and that the SEC was never going to be on board. His goal was to empower the CFTC to regulate him so that he could do all this stuff. If you asked me why he thought it was a good idea to let me into his life to maybe write a book. I think this was the reason that he thought maybe these kinds of people would read a book by me and it would legitimize him. Forbes: What are your biggest unanswered questions? And what are you hoping to learn from the trial? Lewis: Really good question. I know some of what went on between Caroline, Nishad, Sam, and Gary from May of last year until the collapse, but I don't know all of it. There's a bunch of stuff in the book. But more is going to come out about it just how those other three communicated with Sam, about the risks they were running and where the money was. It speaks to the biggest unanswered question. Nobody even argues about what happened. The money was in the wrong place. The question is how and why the money got to the wrong place. And there's no happy story. But there's more and less happy stories. I just don't know. Forbes: Do you think that the story had to end like this for Sam? Lewis: No, I don't. The story for Bernie Madoff had to end the way it ended. There was no real business there. That's a real difference. If in, let's say, January of last year, he had looked at this and said, "This is really down, we have $8.8 billion in customers' money or whatever it was at the time in FTX. Let's just borrow 8.8 billion more from one of these crypto vendors and move the money into cold wallets.” It wouldn't have been that hard to do at that moment. Also, let's say they just keep doing this squirrely thing. And the money is not where it's supposed to be. If nobody actually raises plausible doubts, and people are still happily thinking their money is in FTX they might have earned their way out of it at some point. But on the other hand, it is also true that if your general approach to life is always to double down when you think you have 51/49 odds in your favor, eventually you're gonna go bust. And I do think that, in that sense, there might have been some inevitability to his crash. Forbes: Thank you for your time. Now after reading this I would encourage you all to think of a few things.
Read more: forbes
