When Helping Hurts: What the FTX crash reveals about ethics in business

Effective altruism is gaining steam, but recent scandals have exposed some of the concerning features of the movement.

When Helping Hurts: What the FTX crash reveals about ethics in business

How do you use business to do good in the world? One recent approach, innovated by the Effective Altruism (or EA) movement, is earning to give. That’s where someone secures a high-paying job – think stock trader or C-suite exec – with the aim of giving away a large portion of their money. This sounds great, like a sort of playing-by-the-rules Robin Hood, but it may not be the best way to do ethics in business. 

The recent meltdown of the cryptocurrency exchange FTX and its founder and former CEO Sam Bankman-Fried have brought considerable public attention to EA, whose practitioners believe that the morally right thing to do is to produce the best consequences for the most people. Most of the time, that means increasing things like happiness, health, or wealth for the biggest number of people possible. That’s why they aim to give away large portions of their incomes.

The thought behind EA, and earning to give, is pretty straightforward: EAers believe we’re each obligated to do the most good we can, and one way to do this is to gain as many resources as possible and then produce good in the world yourself. This is why many figures in EA, like Peter Singer, the famous ethicist, have argued in favor of earning to give – and, more specifically, to give to charities that have a verifiable track record of producing good outcomes for the people they intend to help.

Sam Bankman-Fried is a supporter of this movement, and his stated aim in starting his cryptocurrency and investing empire was, at least in part, to earn the most money possible to give away the most money possible. A recent Vice profile on Bankman-Fried explores his background, motivations, and the enthusiastic following that he amassed among financial services professionals. Of course, those familiar with the story know how it ends: potentially billions of dollars in lost assets, and countless broken promises to the charities Bankman-Fried had intended to help.

But aside from the surprising business decisions and unwise investments made by particular actors in his sphere, this story highlights broader reasons to be concerned about Effective Altruism as a movement.

The most obvious concern is this: what if the ethical position endorsed by EA just isn’t true? EA is based on a philosophical view called consequentialism, which says that an action’s ethical value can judged by its outcomes—how much good is produced. Critics of consequentialism often point out that without taking into account ethical values like justice, individual rights, or personal virtue, a movement like EA risks acting immorally in the domains where it exerts influence.

The second concern is about evidence. Even in cases where an EA advocate is a wholehearted actor earnestly trying to better the world through charitable giving, it's hard to justify the thought that a lone billionaire really knows best where funds should be allocated. How do they know they can trust their own evidence? Much more concerning, how do we know we can trust that they have the best evidence? Transparency can help, but at its heart EA asks us to wager that rich donors ultimately know best how to do good with their resources. That’s not a very reasonable bet.

Lastly, there are deep political-philosophical concerns about Effective Altruism. Compass Ethicist Ted Lechterman has recently pointed out that EA can be pretty undemocratic. Not only is it worrying to rely on whatever evidence and justification rich donors may have for influencing the causes they do, it’s also worrying to think that the broader public just doesn’t have a say. Even if large donations are providing aid and doing good for people, it’s easy to have objections to the fact that people aren’t getting their own say in the matter.

The recent FTX meltdown reminds us that the caprices and foibles of particular human beings – like Sam Bankman-Fried – can have catastrophic, cascading effects when massive amounts of resources and moral decisions are entirely (or at least mostly) dependent on them. Earning to give, even at the smaller scale (like becoming a quantitative trader and donating half your income, for example), is plausibly also affected by these problems.

There is also a second cautionary lesson from the undoing of FTX and Bankman-Fried: beware of organizations and individuals using the veneer of “ethics” as a branding opportunity. Bankman-Fried said he was interested in doing the most good he could. But his actions did not reflect this. As his recent Vox interview seems to reveal, his commitment to ethical behavior did not run particularly deep, and had more to do with “winning” than altruism. At best, his commitment to data-backed altruism was misguided for the reasons listed above; at worst, it was just a marketing stunt.

Either way, the truth is that ethics is much more complicated than data analysis alone – it takes serious consideration of first principles. It takes an active commitment to understanding the philosophical and material problems you might face. And it takes a personal commitment to involving yourself in the good causes you care about. While charitable donations are often a very ethically justifiable thing to do (and something that should be encouraged!), financial giving shouldn’t be the only feature of your ethics plan. Serious consideration of the character of your organization, the virtues you want to cultivate within yourself, and the injustices you may be combatting or accidentally contributing to are always necessary as well.