How to Lose $35 Billion with Philosophy
We've come a long way from Plato and Aristotle
In the last few days, you may have heard about Leopold Aschenbrenner—the wonder kid hedge fund manager who lost tens of billions over the course of a few days. It’s the biggest financial fiasco of the year.
If you didn’t read about it in the news, don’t worry. Hollywood will certainly make it into a movie. This 25-year-old hot shot’s financial empire was literally collapsing while guests were showing up for his blowout wedding at a fake Tuscan villa in California. The screenplay practically writes itself.
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It’s Wolves of Wall Street meets Under the Tuscan Sun. Throw in a dose of Margin Call for good measure.
This tyro’s investing strategy looks more like gambling addiction than high finance. Aschenbrenner borrowed to the hilt, using four times leverage to buy AI stocks by the truckload. Then he added to his risk by shorting companies he was sure AI would replace. In other words, instead of hedging his AI position—which is standard practice (and why they call them hedge funds), he doubled down, setting himself up for a failure of Biblical proportions.
When you take chances like this, even a small downturn in AI stocks will wipe out your entire capital. That’s pretty much what happened last week.
I wanted to learn more about the young man behind this collapse—so I went to his Wikipedia page. There I discovered his connection to fraudster Sam Bankman-Fried and the latter’s Effective Altruism philosophy.
What are the odds that the clueless young bro who created the biggest financial fiasco of the year is connected to the clueless young bro who created the biggest financial fiasco of the decade?
But there it is.
And—another coincidence!—the woman who assisted Bankman-Fried, and served 14 months in prison for fraud and money laundering, also helped run her college’s Effective Altruism club.
This is getting to be a trend.
But, of course, none of this is coincidence.
I wrote about Effective Altruism back in 2023, and shared my own history with consequentialist ethical systems of this sort.
Why I Ran Away from Philosophy Because of Sam Bankman-Fried
I abandoned philosophy because of Sam Bankman-Fried, the crypto scammer.
I really could have pursued a career in philosophy—as hard as that is to believe. You’re asking: Can anybody get hired in that field? But as a young man, I managed to beat out a dozen Rhode Scholars when I took a first in the subject at Oxford. I even got exempted from the oral exams on the strength of my performance. I could have parlayed that into a PhD and a sweet teaching gig.
Lord Quinton, president of my Oxford college and a famous philosopher in his own right, was the first person to congratulate me. But I could tell he was a little shocked. He knew me as an eccentric jazz musician from Los Angeles, and here I was making a mark in analytic philosophy.
But I walked away from all this—because I ‘d grown disillusioned with analytical philosophy, and especially the misguided ethical systems that were at the core of my studies. These were the predecessors of Effective Altruism. That term didn’t exist back then, but the worldview did—these systems are all variants of utilitarianism, a starry-eyed moral calculus invented by Jeremy Bentham two hundred years ago.
By the way, Bentham also invented the Panopticon, a prison concept that is the model for today’s surveillance capitalism.