It seems like just last month — because it was just last month — that everyone from Washington insiders to Twitter fanboys were fawning over the pronouncements of billionaire crypto investor Sam Bankman-Fried. He was a “wunderkind,” the successor to banker J.P. Morgan. Stepping in to save one insolvent crypto company after another, he was feted by VIPs and sought after for his political donations and philanthropic thoughts.
Instead of a prophet of the blockchain future, Bankman-Fried, whose crypto exchange FTX filed for bankruptcy Friday, is increasingly looking like Ozymandias 2.0. From a $32 billion valuation earlier this year, his empire is in a free fall following an exposé of its finances by CoinDesk. (The matter is complicated, but essentially they had the goods showing that Alameda Research, Bankman-Fried’s trading firm, was holding a significant number of crypto coins issued by FTX. This undermined faith in both companies and ultimately led to a run on the crypto bank.)
Rival Binance, which initially said it would take over FTX, his crypto exchange, quickly changed its mind, saying things looked sketchy. A source told the Wall Street Journal that FTX had used customer funds to speculate, and depositors fear they won’t get their money back. Washington regulators ranging from the Securities and Exchange Commission to the Justice Department are sniffing around.
But if the warp speed of what went wrong is unique, one part of this saga is not. Time and time again, Americans fall prey to the myth of the billionaire genius, the man (because it is almost always a man) who is better than us mere mortals, able to solve any business or political or philanthropic problem that comes his way — till, suddenly, he is not.
There’s the ongoing spectacle of Elon Musk, the world’s wealthiest man, who with his seemingly impulsive purchase of Twitter, as my colleague Catherine Rampell memorably put it, set $44 billion on fire. Musk acolytes insist he knows what he’s doing, but I must say things do not look promising. Musk, the chief executive of SpaceX and Tesla, is seemingly grasping at virtual straws, firing and then un-firing people as he realizes the company needs them, coming up with a head-spinning number of plans to profit from check-mark subscriptions, promoting a plan to turn the service into a fintech, and threatening bankruptcy. High-level staffers are mostly gone, and the Federal Trade Commission is expressing concerns.
Or take Mark Zuckerberg, who was once talked about as a future president — before it became clearer that his company was raking in money by offering a platform for fake news, hate speech and extremist organizing, fomenting political and sometimes literal conflict worldwide. He’s now also setting money on fire, pouring Facebook funds into a metaverse few want to inhabit. Zuckerberg’s idea of a rethink is to tell his employees “there are probably a bunch of people at the company who shouldn’t be here,” before axing 11,000 mostly non-metaverse-oriented employees this week.
As for Bankman-Fried, the now 30-year-old former billionaire went from anonymity to celebrity seemingly overnight, with his halo of unruly hair recently gracing the cover of Fortune. “The next Warren Buffett?” the tagline read. He became a political megadonor, pouring millions of dollars into mostly Democratic campaigns, till, suddenly, his wallet snapped shut. He claimed, when asked, “I think primaries are more important.” It now seems possible something more was going on.
I’m not denying that some billionaires are brilliant entrepreneurs. But they are way less special than they are frequently told. (Some are just heirs, or lucky Powerball winners.) As our men of business become more prominent and wealthier, they enter a feedback loop. Sycophants flatter instead of challenging them. This impacts their ability to hear criticism. And that leaves them more likely to cling to toadies who feed their now inflated self-image. All too often, the end result is ever larger mistakes and more ethically dubious behavior.
Nonetheless, it remains as American as apple pie to look up to these titans of wealth. The period before the Great Recession saw CEOs and bankers anointed as voices of wisdom. (This year brought not one but two books on late General Electric CEO Jack Welch, once celebrated, now thought to have led his company — and our economy — over a financial cliff.) The financial catastrophe of 2008, which you might have thought would have put an end to this peculiarly American form of worship, just gave us a new round of would-be saviors. Heck, we even elected a billionaire — or a man who claimed to be one — as president. He has gone on to wreak political havoc every day since.
It would be nice to think that Bankman-Fried’s sorry tale would finally put an end to this once and for all. But I wouldn’t, er, bank on it. We lack hereditary kings in this country, but celebrity worship combined with our admiration for money-making frequently leads us astray — even when, as in the FTX case, the billionaires’ real superpower is turning your cash into fool’s gold.