TL;DR there was substantial warning, months in advance that EA's reputation was becoming deeply entangled with cryptocurrencies, and cryptocurrencies gave substantial warning that they could eventually bubble in a housing-market like crash. SBF clearly exposed EA to this risk for years, and people should have noticed this.

Recently, I've been hearing a lot of people talking about the warning signs that could have prepared people for SBF and the FTX crisis. Intuitively, this seemed futile, since billionaires have to behave randomly; if they're predictable, then that leaves them vulnerable to being outmaneuvered and harvested by another billionaire, some of whom have a stronger appetite for predatory games than other billionaires.

However, SBF and FTX were an exception. It's been very strange to see tunnel vision on the tiniest bits and pieces of SBF's actions when there was this elephant in the room:

It's only two and a half minutes, and I highly recommend it. This slimy commercial, aired at the super bowl more than 8 months before the FTX crisis, was by far one of the biggest warning signs that something was off about SBF, and the people who noticed this should have felt emboldened to speak up and tell a lot of people when they notice something doesn't line up.

In this commercial, FTX depicts cryptocurrencies (including NFTs, which as late as Feb 2022 were pretty widely known to be bad deals) as on the same level as several other foundational innovations in the human race, such as the wheel, and the portable music device (the progenitor of the modern smartphone). The commercial depicts forward-thinking people and cryptocurrencies as an unstoppable force for progress, and caricatures all critics and dissidents as clownlike enemies of progress who are inevitably ignored, defeated, and marginalized, so that innovation can take place and justice can be restored.

It is definitely the case that many institutions have an internal culture that is stifling to progress. People with experience in Silicon Valley, however, know that isn't the entire story.

About a week ago, Zvi wrote a fantastic article on the FTX crisis, and it slipped in a section evaluating the entire industry. Included there:

I mean, it would take out a big chunk of EA because it would bring down all of crypto quite a lot. The failure of Tether would be a catastrophic event for crypto. ‘I do not hold any USDT’ is not a way to stay safe out there.

People familiar with economics can tell, at a glance, that it's worth checking to see if industry suffers heavily from Information Asymmetry: that one party to the transaction (in this case the sellers and the coin miners that they subsidize) has such superior knowledge of the product relative to the second party to the transaction that they routinely exploit the lesser party, such as lemons being much more profitable to sell at the used car market price than well-working used cars. Considering that coins can rapidly and unpredictably become worth a very small fraction of their original price, it definitely seems like that would be an even bigger issue here.

Even worse, Information Asymmetry is widely covered in intermediate microeconomics classes and is well-understood by everyone in business and most people in or adjacent to sales. All of this seems like a very worrying way for an industry to be structured, it would be precisely the same thing that drove the flow of toxic assets during the worst days of the mortgage-backed securities crisis around 15 years ago (the housing bubble). This is not because people are mimicking 2008 of course, but rather that it's generally the way that things fundamentally tend to unfold when there are large numbers of unscrupulous people who are trying to pump things as high as possible because they think they can time the market and make a ton of money.

I've seen a lot of people joking that SBF tried to triple his wealth, or become a trillionaire, or tried to "double-or-nothing the earth", and that the risk might have been worth it somehow. That doesn't really fit the evidence that we've been seeing from FTX for more than a year now has indicated that they are trying to spread awareness of cryptocurrencies, or, in other words, to turn very large numbers of people (e.g. the types who pay attention to sports or buy lottery tickets) to become amateur investors who buy and sell tokens of dubious value, in the same markets as professional investors who operate at a scale that lets them strategically time markets and hire sales teams to make transactions look more valuable then they actually are.

The fact is that SBF routinely threw his weight behind the concept of technological innovation, which is central to EA, and used it to spend massive sums of money promoting cryptocurrencies, to involve tens of millions of additional people into a high-tech industry with an inevitable net loss for the vast majority of participants, since the vast majority of participants were totally unprepared and incapable of fending for themselves in the murky world of cryptocurrency. The scale that tens of millions of people were operating at were "I heard about FTX from a commercial, I heard about FTX from the stadium getting renamed, so I think I'll try it out" and that's a scale that's too small to let a single individual get the information they need for a seat at the table. When billions of dollars move like that, it's one of the oldest indicators that an industry is not getting its investment inflows from investors who can actually forecast future profitability. The fact that cyptocurrencies have historically tended to quintuple in value, multiple times per decade, is by far the most attractive element in the minds of the masses; if it merely outperformed stock by 1.5x or 2x then that would not be nearly enough to compensate for the vagueness and doubt that any ordinary person would have.

A big takeaway from this super bowl commercial is that willingness of SBF and FTX to optimize for crypto at all costs, including knowingly and deliberately exposing EA to the risk of reputation loss, months in advance. Dustin Moscovitz doesn't do this, his investment porfolio has around as much crypto as anyone else on Wall Street nowadays. Peter Thiel's criticism of Warren Buffet in April was probably just some dispute between him and Warren Buffet, and he's not currently affiliated with EA anyway. Even Eliezer Yudkowsky (not a billionaire) refuses to talk about cryptocurrency, no matter how many people pester him about it. They weren't willing to throw their weight behind the dream that cryptocurrencies will replace normal currencies and commodities and multiply the early-adopters balances by 100x, and they certainly weren't willing to wager EA on that dream.

SBF was not like that. There were clear warning signs that he was risking EA for the future of cryptocurrencies, not risking cryptocurrencies for the future of EA.