In early November, FTX filed for bankruptcy, signaling the collapse of what had been the world’s fourth-largest cryptocurrency exchange. Headlines focused on the sudden, unexpected loss of billions of dollars and the allegations of fraud directed at CEO Sam Bankman-Fried. He was arrested and extradited from the Bahamas to New York, where he faced criminal charges in federal court on Jan. 2.
Bankman-Fried tried to minimize the crimes of which he was accused, suggesting that the money he made would have supported large-scale charitable giving. In one interview, Bankman-Fried said there were “a lot of things” that have “a massive impact on the world,” and that he cared most about “bed nets and malaria” and “you know, saving people from diseases no one should die from.”
This charitable vision derives from the “effective altruism” movement, which encourages the wealthy to focus on saving lives and introducing business metrics to charitable projects. In this, Bankman-Fried is both embodying and building upon some of the philanthropic vision of the wealthy titans of industry from the late 19th century.
Bankman-Fried’s FTX symbolized the power of the knowledge industry in the 21st century to create wealth through investment information. By contrast, in the late 19th century, American entrepreneurs made fortunes in industrial manufacturing, mining and marketing of steel, coal, petroleum and railroads. Yet, despite these differences, like Bankman-Fried, these industrialists became serious about the “business of benevolence” in giving their money away. Establishing themselves as philanthropists, business executives like Andrew Carnegie and John D. Rockefeller relied on sophisticated foundations led by knowledgeable administrators to shape social and educational programs nationwide in an era where the federal government had relatively little presence in most people’s lives.
Carnegie’s business was steel, with his manufacturing and production projects culminating in the creation of U.S. Steel in 1901. When Carnegie sold U.S. Steel that same year he shifted from being an industrialist to becoming a philanthropist, using his fortune to enlist community support to establish public libraries to provide free access to books — which Carnegie viewed as key to social uplift and self-improvement — for all.
By 1906, the Carnegie Foundation for the Advancement of Teaching carried out the aim of “private power for the public good.” Among other things, the foundation prodded colleges and schools to pursue “standards and standardization” in curriculum, graduation requirements and admissions criteria, and it sponsored educational research to root out low standards and address inadequate funding. The foundation’s work reflected Carnegie’s philosophy of philanthropy and the duties of the wealthy set forth in his own “Gospel of Wealth.”
Following a similar trajectory, between 1870 and 1911, Rockefeller used his Standard Oil to create a monopoly that controlled production, refining, distribution and sales, building great power and an enormous fortune. Amid this period of industrial growth, Rockefeller added philanthropic organizations to his empire, including the General Education Board, founded in 1902 to commit expertise and resources to supporting public education in the South, where local school systems lacked adequate leadership and tax dollars. Rockefeller’s initial investment in the board of $1 million grew to $180 million over three decades.
Rockefeller also gave generously to higher education, which included $35 million in funding for the establishment of the University of Chicago, $27 million to fund Spelman College and the Atlanta University Center, and $50 million to found Rockefeller University in New York City. In 1911, he also launched his Rockefeller Foundation to address public health, with a cumulative donation of $48 million.
Philanthropists like Carnegie and Rockefeller were strategic in their giving and thought about how to measure their impact. For example, the original leaders of the Carnegie Foundation for the Advancement of Teaching set forth “Improvement Science Principles” that emphasized measuring results in solving problems.
In the century since Carnegie and Rockefeller introduced the foundation as a businesslike way of achieving their philanthropic objectives, nearly 90,000 foundations have been created in the United States.
Both business practices and philanthropy have changed over the past century, but today’s super-wealthy tech entrepreneurs operate in ways that echo Carnegie and Rockefeller — only with a 21st-century twist. In evaluating their giving, these titans apply strategy, performance metrics and cost-benefit analysis.
For example, high-tech billionaires like Dustin Moskovitz (Facebook) and Pierre Omidyar (eBay) relied heavily on metrics and data analysis to achieve business success, and they brought those concepts and practices into their philanthropic endeavors. This has included taking these ideas into developing countries, where they believe results can be readily measured in lives saved.
Many wealthy elites find inspiration in the ethics espoused by Princeton philosopher Peter Singer, who also inspired the founders of effective altruism, launched in 2011. The movement embraces prioritizing the saving of lives before money is spent on other causes such as the arts, culture and education.
Like Carnegie and Rockefeller, the philanthropists who support effective altruism and its causes want to ensure efficiency and effectiveness in the allocation of charitable resources. In the words of effective altruism’s website, it “aims to find the best ways to help others and put them into practice.” In doing so, it relies on algorithms and data analysis.
Bankman-Fried began his own involvement with effective altruism while still in college, and when he became one of the planet’s wealthiest men, it appeared that the movement would benefit greatly from his financial success. Indeed, the FTX Future Fund, launched in February 2022, committed $130 million in grants by August, with the lion’s share going to effective-altruism causes.
Much like Carnegie, Bankman-Fried utilized new technologies to build a huge fortune and, while doing so, he declared his intention to devote nearly all of it to the causes advanced by effective altruism. We are now left to wonder if Bankman-Fried may have only wrapped himself in the philanthropic flag to shield his business practices from closer scrutiny. And now, the collapse of FTX has dealt a blow to both the finances and the image of the movement.
That’s important because effective altruism is a philosophy and movement still in search of a philanthropy. It is relatively untested and has no mooring with a foundation. Although effective altruism’s leaders claim 7,000 or more bright young adults with high earning potential as participants, it remains to be seen if effective altruism will make contributions to the betterment of humankind comparable to those of Carnegie, Rockefeller and the many philanthropists who have followed their lead. Time will tell if Bankman-Fried’s spectacular fall diminishes the importance of the movement’s funding priorities and its approach to measuring results.