johnmaconline

The first problem with FTX, and the big reason why SBF went to jail, is that it was a plain ole Ponzi scheme.

SBF owned two companies:

• Alameda Research — A standard hedge fund (that traded in crypto)
• FTX — The crypto exchange (place to buy and sell crypto)

Although two separate companies, they didn’t keep a robust enough financial separation between the two. In fact, they didn’t separate them, which ultimately led to the collapse. 

If you opened an account on FTX and dropped some money into it, your dollars were physically held inside of Alameda rather than FTX. The old shell game. They did this because when FTX first opened, no bank would supply it with a bank account. Therefore, they found a pragmatic solution in using Alameda’s bank account. That, in and of itself, is fishy, but maybe not illegal (depends on who you ask) because if you do the accounting correctly and keep those funds separate, it shouldn’t be a big deal.

But they didn’t do that. 

When Alameda needed extra funds, they just used the money (“borrowed”) in the FTX user accounts. That’s illegal. That’s a Ponzi scheme.

They could’ve gotten away with it without the other two problems: the volatile asset class and no adults in the room.  

So we’ll talk about why it went bad next…

Crypto’s a scam!
Crypto’s full of crooks!
Crypto’s not real!

You might think that Sam Bankman-Fried’s jailing and the FTX exchange’s collapse were inevitable because, you know, crypto. Crypto’s a scam. It’s full of crooks. It’s not real. Of course, it collapsed.

But that wouldn’t be exactly correct. Crypto was a minor role player — more like the drug pusher standing outside the backstage entrance greasing the party wheels. A problem-enabler, but not the problem. 

The collapse itself was due to plain ole, run-of-the-mill f’nancial reindeer games. Namely, FTX-Alameda Research was a Ponzi scheme wrapped around a highly volatile asset class run by a bunch of people (or at least one person) who overestimated their abilities and underestimated the need for adults in the room. 

First, let’s tackle why FTX and Alameda Research were a Ponzi scheme.

A strange thing happened today. The FedEx truck stopped in my driveway.

Of course, that’s not strange. This time of year, between the endless string of UPS, FedEx, and Amazon trucks, my driveway presents an expert-level test in trucksmanship. True entertainment from behind the window of my home office. 

What was strange, however, was the other car that followed it into my driveway and parked behind it. That piqued my attention. The driver got out, waited for the FedEx person to step out, and then approached her. For the next minute or so, he calmly but earnestly waved his hands and flapped his jaws about something that irked him. At least, that’s what it looked like through the silence provided by my window and a good 100 feet of distance.

Then he nodded, returned to his car, and took off down the road. 

I met the FedEx driver at my front door (a wine delivery).

“You OK?”

“Oh sure. He thought he was right and he just needed to be heard. Sign here, please.”

And she was off to finish yet another long day of Christmas present deliveries. 

“Just needed to be heard.”

Whether out of a feeling of rightness, superiority, or a sense of justice, some people just need to be heard.

Recognizing it is next-level. 

Which would you rather?

I heard this question posed a few days ago, and I can’t get it out of my head. My initial reaction was, “Of course, I’d want to live a good story. Everyone would.”

But now that it won’t leave me and I’ve ruminated on it for a bit, I’m not sure of my own answer, let alone the statement about “everyone.” I love to read a good story. I’m trying to write good stories. I’ve lived some good stories.

But which I would rather? I think it comes down to emotional risk.

Reading a good story exposes you to emotional risk in a safe and controlled environment. The story can move you emotionally and even bring about emotional changes in you. But you’re engaging with it from the safety of the stands. You’re behind the glass, cheering but not affecting the outcome.

Writing a good story ratchets up your emotional risk by moving you out of the stands and onto the bench. Now you’re the coach. It’s your strategy and tactics. You’re directing the characters. It may work, or it might not. You can’t put the puck in the net yourself, but your job is to ensure the players can. Now you have skin in the game. Now you’re exposed.

Living a good story, however, thrusts you down onto the ice. You’ve got the stick and helmet, and you’re trying to score while the other guys are trying to stop you. Every decision, action, and consequence is real. You may lose. You may get hurt. You may destroy what you’ve already built. For real. But what if you win?

The best stories require conflict, journey, and transformation. Are you up for it?

If you’re on one side, you want to be able to say or shout the things that mean something to you, identify you, think others need to hear, or cause the emotions you’re feeling.

When you do, the other side gets to be offended, yell back, tell you why you’re wrong, boycott, protest, and say the things that are causing the emotions that they feel.

That’s how it works. It’s how it has to work.

You may get scammed. You may be confused. You may get led down a dark path. You may get injured.

Because free speech isn’t about truth, right and wrong, the way it should be, safety, comfort, or what’s good for us individually or collectively.

Paradoxically, it might just be the best protection we have in this diverse world.

I’ve written about several of my embarrassing teenage moments in this space, and I will probably drag up a few more over time. Lord knows there are more. I was an expert at public embarrassment. A real pro. 

I do it for a few reasons. First, it’s cathartic. Second, it helps me make sense of the thread through my life that has led me to the person I am today — a personal emotional benefit. Third, I know I’m not the only one. In fact, I suspect many others out there have similar and worse stories. Kindred spirits. 

But also, I see a concerning trend in parenting culture today. I think we’re confusing embarrassment with bullying. That confusion isn’t serving our kids or their future adult selves. Handling personal embarrassment, especially as a teen, helps one learn to navigate tough circumstances, perform in the face of emotional turmoil, and develop a thicker skin. All good qualities to have as an adult. 

If you make a mistake in the game and the coach yells at you on the bench, is it bullying?
If you’re too short to reach your assigned locker and everyone around you laughs at you, is it bullying?
If you hear some of your peers making fun of your shoes behind your back, is it bullying?
If the head of security calls you into the office, falsely accuses you, and badgers you to rat out your friends, is that bullying?

I think the answer is, “it depends.” Any of these scenarios could be bullying. At least one of them was indeed. But bullying involves a power imbalance and the intention to belittle. Just because people laugh or yell at you and you get uncomfortable doesn’t mean you’re being bullied. 

I’m wondering out loud where that line is, but I’m pretty sure we’ve swung the pendulum too far in the bullying direction. 

Synergies.
Core competencies.
Core focus.
Strength alignment.
Leverage.
Circle back.
Move the needle.
Pivot.

I’ve heard them all. You have too. They’re meaningless. Plus, you can jumble them together to make a word salad. Also meaningless.

If you’re an executive, manager, or leader of teams, beware of these terms. They might work in legal scenarios, earnings calls, and marketing presentations. But they don’t work with your team.

All they do is disconnect you from the people doing the work.