IMPCO, don't injure yourself by returning FTXFF money for services you already provided

"Huh, this person definitely speaks fluent LessWrong. I wonder if they read Project Lawful? Who wrote this post, anyway? I may have heard of them.

...Okay, yeah, fair enough."

One thing I definitely believe, and have commented on before^[1], is that median EA's (I.e, EA's without an unusual amount of influence) are over-optimising for the image of EA as a whole, which sometimes conflicts with actually trying to do effective altruism. Let the PR people and the intellectual leaders of EA handle that - people outside that should be focusing on saying what we sincerely believe to be true, and worrying much less about whether someone, somewhere, might call us bad people for saying it. That ship has sailed - there are people out there, by now, who already have the conclusion of "And therefore, EA's are bad people" written down - refusing to post an opinion won't stop them filling in the middle bits with something else, and this was true even before the FTX debacle.

In short - "We should give the money back because it would help EA's image" is, imo, a bad take. "We should give the money back because it would be the right thing to do" is, imo, a much better take, which I won't take a stand on myself at this point since I don't have a horse in this race.

Maybe I should write a post about this at some point...though I recognise that now, in particular, isn't exactly the right time to do that.

1. ^{^}

   On a deleted post, so I can't link the comment here, but people can search my comment history for "Personally, I disagree strenuously" if they wish to verify this.

Amendment for the sake of thoroughness:  Looking back, I think at one point I was passing through the Bahamas anyways, and asked FTX if they wanted me to stay over a week and talk to a bunch of visiting EAs they had in a Nassau hotel.  I paid for the hotel (and later an Airbnb when the hotel ran out) out of pocket, and was reimbursed for that by FTX or FTX FF or something.  I hardly consider this 'being funded', I didn't go to any beaches or try to turn it into a vacation, more like I did some free work for them and had a place to stay while doing it; but there was nonetheless at one point a reimbursement that went from FTX wallet to Yudkowsky wallet.  I myself consider this unimportant, but in matters like these it is important to be thorough.

I agree very much with your guess that SBF's main mistake was pride.

I still have some unpleasant memories from the 1984 tech stock bubble, of being reluctant to admit that my successes during the bull market didn't mean that I knew how to handle all market conditions.

I still feel some urges to tell the market that it's wrong, and to correct the market by pushing up prices of fallen stocks to where I think they ought to be. Those urges lead to destructive delusions. If my successes had gotten the kind of publicity that SBF got, I expect that I would have made mistakes that left me broke.

Thank you. I appreciate thought leaders stepping up in this crisis, which points to the resilience of this movement. My husband was the happiest I’ve seen him in days when he found that you had written a new post.

I want to highlight a small section “ Be kind to yourself, ask what a friend would tell you, when you judge how much hardship it would be to repay; because I'm worried I know too many people who are going to be way too harsh about that.”

This is a technique in psychology called Mindful Self-Compassion, which I have studied and found very useful personally and with my patients (I’m a physician, not a psychologist). The three elements are self-kindness (vs self-judgement), recognizing our common humanity (vs isolation) and mindfulness (vs over-identification). See self-compassion.org for more

Be gentle with yourselves EAs.

Eliezer -- I strongly agree with this, and thanks for expressing these views in a clear and timely way. 

I've seen some amount of EAs beating themselves up about 'we should have known better than to trust SBF and FTX'. 

Well, FWIW, I've been involved in crypto investing pretty intensively for a couple of years, and have followed crypto news fairly closely. Every crypto protocol, exchange, business, and ideas attracts its share of FUD (fear, uncertainty, & doubt -- i.e. strategic slander from short-sellers and rival businesses). Lots of people were skeptical about Luna before it collapsed. Lots of people have been skeptical about the Tether stablecoin for years, and it hasn't collapsed yet.  People were skeptical about Solana being quite centralized and having VC backing -- but I don't recall much concern about Solana having SBF's backing. 

I honestly didn't see big red flags around FTX being waved by crypto journalists or influencers.  FTX seemed to attract a lot less FUD and skepticism than most other crypto businesses. (I could be wrong, and this is an empirical question -- one would need to quantify relative FUD amounts across projects, maybe in proportion to their market cap or trading volume.)  

I didn't happen to use FTX myself, because I preferred using exchanges that were registered in the US for legal purposes, and that used 'proof of reserve' audits to verify user funds. But I could easily imagine a counterfactual world in which I transferred a lot of crypto to FTX -- trusting partly in its EA bona fides -- and lost everything.

Long story short, I agree with one of Eliezer's key points: if the smartest VCs in crypto and Silicon Valley thought FTX was a great investment and an honorable company, and they have access to all the due diligence and internal data and audits that EA organizations didn't, and if crypto journalists were NOT routinely warning that FTX was a shady company, then maybe we shouldn't be beating ourselves up too hard about having been duped. 

(Epistemic status: moderate at best; subject to updating given new information about a complex, ongoing crisis).

I agree with this post from a moral perspective, though one thing it does not touch on is the legal question. My guess is that, in the same way that a court probably wouldn't try to claw back money from a utility company/janitor/etc. that FTXFF beneficiaries are also probably safe, but IANAL so maybe somebody who knows more there could comment.

Strongly, very strongly endorse and agree with this take.

The perspective of lawfully selling utilons for money was a perspective that I didn't know I was missing in viewing philanthropy.

I think the above is correct, on top of what Elizier has written one should also consider the legal issues around this mess. 

I'm by no means a lawyer and so this is definitely not legal opinion, but it's very likely that this will be mired in bankruptcy procedures for a very long time (Lehman Brothers is still unwinding for instance) and even if the money was returned to FTX ventures it isn't certain that it would then be sent on to the ultimate people that you think are most deserving (i.e. the ones that had their accounts wiped out). It sounds as though the structure overall was a shit show and there were multiple entities in between, so where each account was held and how those liabilities sit in terms of priority of debt is probably very very unclear. There are still some chances that there will be some amount of money given back to the account holders as well.

In addition (and this might be even more controversial), I hope that the people that did get wiped out were using money that they could lose to some degree. Keep in mind that they were investing in crypto in offshore exchanges, and although FTX was thought to be a trustworthy partner, the entire space was known for scams and other mess, so hopefully there was an element of buyer beware for mos t of the account holders.  

What does "IMPCO" mean? Search engines are failing me.

I appreciate the post (even though I have no idea what Lawful Good / Neutral means etc. haha). 
I think it is a good time to remind ourselves that EAs in general (including myself) have a tendency for over-responsibility. And feeling responsible for things which are broader than our scope makes us feel bad... I like the plumber example and the Sequoia Capital example.  If the big VC got fooled, how can I not get fooled? And the plumber rightfully deserves money for his sweat, even if this money is dirty. The plumber did not know this in advance.  
 

If the community is paying back, I think it makes more sense for this to become primarily the responsibility of major funders instead of individual grantees, for practical reasons. I don't think individual EAs need to take on hardship to pay it back, and we can consider large funders paying on their behalf to be community support work or grants that they would have made anyway. Also, having major funders pay is more efficient than having individual grantees each worry about this.

I worry that people who hold the contrary viewpoint, that it's fine to just Lawful Neutrally trade utilons for money and undercharge to the extent you're Good, will feel inhibited and afraid from presenting this viewpoint if they hold it; and when that happens, in EA, I often do suspect that nobody else will dare to speak the contrary viewpoint, if not me.

I tried to here and here, but I very much appreciate someone with much more eloquence and clout saying it too.

Strong upvoted for all these other excellent points though IMO:

You can try to do a little good in the world, or even sell a little good into the world, without signing up to be the martyr who gets all the blame for not being better when something goes wrong.

and:

If Sequoia Capital can get fooled - presumably after more due diligence and apparent access to books than you could possibly have gotten while dealing with the charitable arm of FTX FF that was itself almost certainly in the dark - then there is no reasonable way you could have known.

and something I'd been starting to think is more likely:

My current guess is more that it'll turn out Alameda made a Big Mistake in mid-2022.  And instead of letting Alameda go under and keeping the valuable FTX exchange as a source of philanthropic money, there was an impulse to pride, to not lose the appearance of invincibility, to not be so embarrassed and humbled, to not swallow the loss, to proceed within the less painful illusion of normality and hope the reckoning could be put off forever.  It's a thing that happens a whole lot in finance!  And not with utilitarians either!  So we don't need to attribute causality here to a cold utilitarian calculation that it was better to gamble literally everything, because to keep growing Alameda+FTX was so much more valuable to Earth than keeping FTX at a slower growth rate.  It seems to me to appear on the surface of things, if the best-current-guess stories I'm hearing are true, that FTX blew up in a way classically associated with financial orgs being emotional and selfish, not with doing first-order naive utilitarian calculations.

and, finally, this:

I do think that EA needs more of the spirit of people who say:  "Yeah, you pay me, and I'll get the job done that I said I'll do, and then it's my money and I'll use it to make myself happy; and that I'm a good person shows in how I'm undercharging for this and maybe went and accumulated professional expertise in a field where I'd be underpaid, but I still own myself and what I'm paid is still mine."  

[Edit: And this! "though the real criticism cares much less about what you actually do and much more about what they just wildly-guess / satisfyingly-imagine you're doing"]

I think there's at least some difference between [money you've already been paid for work you've already done] and [money you've been granted for future work that you have not yet done / money you haven't yet spent on hiring other people / etc.]; I very clearly agree with you in the first case and think it's at least murkier in the second case.

I think this is clearly right insofar as it pertains to grant money already "earned" and insofar as it states that the moral bar for philantrophic service providers should be no higher than for other service providers.

However, I think its reasoning may not apply to portions of a grant contract that are presently "unearned." To extend your examples, I am not convinced the grantee's obligations are materially different from those of a stadium authority or a plumber. Both are fine to retain monies for services already rendered.

But I am not convinced the stadium authority, for instance, could ethically retain the unearned portion of the contract monies as long as it carried through on its commitment to use the FTX name for the next decade. Like the naming, the further execution of the grant contracts generates no utility for the estate/victims, and there is no super strong reliance argument as there is for completed acts.

That isn't to say that I think there is an ethical obligation to return any funds that are presently unearned -- I think that will depend on facts yet to be discovered.

Nitpick:

It's fine to call it your charity and your contribution that you undercharge for those utilons and don't capture as much value as you create - if you're nice enough to do that, which you don't have to be, you can be Lawful Neutral instead of Lawful Good and I won't think you're as cool but I'll still happily trade with you.

(I apologize for resorting to the D&D alignment chart, at this point, but I really am not sure how to compactly express these ideas without those concepts, or concepts that I could define more elaborately that would mean the same thing.)

I like "playing on the side of humanity" (or the more verbose "playing on the side of all sentient beings"), in contrast with "playing for your own side". So I might say something like:

You don't have to be playing on the side of humanity all the time, you can also look out for your own interests—and in practice you should be doing a mix of the two. I won't think you are as cool if you are primarily looking out for number one, but I'll still happily collaborate with you.

Thanks for laying this out. May help many to figure out what to do. 
 
My view about a red line at the moment is that a charity should stop accepting donations once it's know that a source is fraudulent. To avoid fraudsters deriving benefit from being associated with the charity. However, when the donations are in the past, there is only a very weak, if any,  PR benefit for the fraudsters at hand.  In that situation an important (and in EA context maybe the main) harm is that keeping the money by charity will encourage future naive consequentialists. So this indirect effect on one side, and the immediate harm to the causes on the other. It's a tough call, glad I don't have to make it.
 

It would be great if the current discussion leads to a clear precedent and it being clearly stated in EA charity policies what will be done in case of funder's fraud. This would give the clear signals to the naive consequentialists and (in case of fraud) make  decisions for charities easier. Actually I bet there are well described precedents and some guidelines available, is anyone aware of such? 

If Sequoia Capital can get fooled - presumably after more due diligence and apparent access to books than you could possibly have gotten while dealing with the charitable arm of FTX FF that was itself almost certainly in the dark - then there is no reasonable way you could have known.

Sequoia has different incentives than EA. By design investments have limited liability, and “companies should be leveraged and hold a linear utility curve” is a dominant concept in finance. FTX unethically using customer deposits would’ve broadly aligned with Sequoia’s interests so long as Sequoia retained the ability to distance themselves from legal and reputational damage.

Sequoia was incentivized to engage in a degree of wilful ignorance, and I would suspect they did so.