Would you buy crypto from this guy?
A few years ago I did a post that asked the question Why do we think rich people must be smart? It was in response to a couple of embarrassing scandals then in the news involving billionaires: Robert Kraft getting caught in a massage parlour and Jeff Bezos sending dick pics to a girlfriend. Sure these guys were rich (Bezos was the richest person in the world at the time), but they obviously had more money than common sense. Still, I think most people tend to excuse bad behaviour of this sort, seeing it as just boys being boys and basically unrelated to the more serious business of acquiring ever more wealth.
But what then should we think of more recent headlines?
Item One: Elon Musk, who supplanted Bezos as the richest man in the world (at least for a time), bought Twitter. It’s not clear if he really wanted to buy Twitter, or if he sort of stumbled, in a very stupid way, into having to buy it. In any event, most expert opinion I’ve read says that he paid at least twice what the company was worth, and maybe as much as four times as much. That’s not smart. But what’s an extra $20 billion to Elon? And, as he said, he was just doing it for the LOLZ anyway.
The immense wealth of Musk, as has been widely reported, was built out of a lot of hot air and government money, which should have given Twitter boosters pause. And to be fair, a lot of business and tech types were pretty sure Musk didn’t know what he was getting into by buying Twitter. I don’t think any of them were forecasting the disaster that’s been unfolding thus far though. Musk doesn’t know what he’s doing, a fact that even he might slowly be becoming aware of. Meanwhile, was there nobody in his court to tell him just how stupid he was being? Evidence suggests not. Indeed, his courtiers were egging him on. As Charlie Warzel observed in The Atlantic: “the seed of Musk’s Twitter purchase was planted by sycophants deferential to the billionaire who will never give him hard, truthful advice, because they wish to stay close to him.” Yes, it’s our old friend the bubble of privilege again.
Samuel Bankman-Fried, the CEO of the cryptocurrency exchange platform FTX experienced a rapid fall from grace when the company went bust. Indeed, the collapse of his personal fortune is thought to have set some kind of record. Reading his Wikipedia entry is good for a laugh:
Bankman-Fried’s net worth peaked at $26 billion. In October 2022, he had an estimated net worth of $10.5 billion. However, on November 8, 2022, amid FTX’s solvency crisis, his net worth was estimated to have dropped 94% in a day to $991.5 million, according to the Bloomberg Billionaires Index, the largest one-day drop in the index’s history. By November 11, 2022, the Bloomberg Billionaires Index considered Bankman-Fried to have no material wealth.
In fact, some reports say that his personal assets may now be below zero. Like I say, funny stuff. Unless, of course, you invested in FTX (which I’d previously warned against). But sticking with the point of this post, doesn’t this reveal that SBF was a Crypto Emperor (as the New York Times dubbed him) with no clothes? That he wasn’t some rebel financial genius, but in fact a moron?
John J. Ray III, the person appointed as CEO of FTX to guide it through bankruptcy, had some choice words for describing the corporate culture he found when he opened the books: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” This from the guy who wound up Enron.
In both these cases we have billionaires not behaving badly in their downtime but demonstrating that they’re practically clueless when it comes to running a company (that is, doing their job). But both Musk and Bankman-Fried were beneficiaries of the deep-set myth of meritocracy in America. For more on this you can read my reviews of Twilight of the Elites by Christopher Hayes and The Tyranny of Merit by Michael Sandel. Suffice it to say here that great wealth has to justify itself somehow, and most often this is by using wealth as a proxy for intelligence, talent, a hard work ethic, etc. Because if you’re so smart, why ain’t you rich?
More often, however, great wealth is the result of luck, primarily through the accident of birth but also through happening to be in the right place doing the right thing at the right time.
The poster boy, idol even, of the collapse of such notions as money = brains is Donald Trump. But by now other examples are ubiquitous. Jeffrey Epstein was another supposed billionaire (actually he fell quite a bit short, but he was still very rich) whose wealth no one could explain. One longtime friend even dismissed Epstein’s intelligence by simply saying “He never knew nothing about anything.”
Now one thing that does stand out about a lot of these people is that they tend to be good at math. And being good at math, or being the product of a STEM education, is often seen as being a proxy for intelligence these days. But, again just looking at examples like Musk, Bankman-Fried, and Epstein, one has to wonder. Intelligence takes many different forms, and being good with numbers, while it may be a lucrative skill, is no sure sign of super-intelligence. If just means you’re good with numbers.
As Stephen Jay Gould once remarked, “I am, somehow, less interested in the weight and convolutions of Einstein’s brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops.” I think everyone understands this on some level, so why do we keep equating vast wealth with genius-level intelligence, especially given the weight of evidence to the contrary? I’m sure Elon Musk and Samuel Bankman-Fried are both reasonably bright guys, but that’s about it. They are also idiots. And, weirdly, I think that it’s by being idiots that they got so rich.