The Generalist - The Wisdom List: Sam Bankman-Fried

Hey friends,

As many of you will know, I’m obsessed with how elite business leaders operate.

How do they make their decisions?

What do they worry about?

What do they look for in talent?

How would they describe their company’s story?

What managerial missteps have they made?

There’s been one founder in particular that I’ve wanted to ask these questions of: FTX CEO Sam Bankman-Fried. With a team a fraction of the size of many competitors, Sam has built a $32 billion behemoth that feels like it's still just getting started. That puts him in an unusual position – operating a company of real magnitude but still developing as a leader.

Today, you’ll get a chance to hear how Sam thinks about maintaining focus, scaling his skills, retaining a high-performance culture, and much more. Jump in to get started.
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PS - who should I talk to for the next edition of The Wisdom List? Shoot me your top picks and I’ll do my best to interview them!

Brought to you by FTX US

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A final note: while FTX US is this edition’s sponsor, the interview below is not sponsored. I just really wanted to ask Sam these questions.

The Wisdom List: Sam Bankman-Fried

Actionable insights

If you only have a few minutes to spare, here's what investors, operators, and founders should know about building, according to FTX CEO and founder Sam Bankman-Fried.

• Recognize your responsibility. A CEO’s job is simple: to make sure good things happen for their business. To do that, you may have to step in to handle a particularly challenging task and drive it toward the desired outcome. Simply delegating a project to someone is not enough – your responsibility only ends when the job is done.
• Beware of hiring the “right” people. You may feel pressured to hire candidates with the “right” CV. Doing so often backfires. This can be particularly costly when it comes to senior positions. You may think it’s the smart move to bring aboard a CRO with decades of experience, but they may not have the hunger to grind at a growing company. Prioritize the ability to learn over experience when picking new teammates.
• Understand your competition. Maintaining competitive awareness is important. Rather than taking a zero-sum perspective, try and understand why your rivals make the choices they do – and track the results over time. You’ll learn how your decision-making stacks up and whether you need to update your mental models for the space in which you operate.
• Scale with purpose. Adding headcount for the sake of it is a dangerous game. Companies that grow too quickly may lose their ability to execute and innovate. FTX scales intentionally, only adding staff it believes it can support and that will help achieve a particular mission.

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Few companies have grown as quickly as FTX. In a little over three years, Sam Bankman-Fried’s company has grown from a promising derivatives platform into one of the largest exchanges on the planet spanning stocks, tokens, NFTs, and other financial services.
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Navigating that speedrun would be difficult for any founder, but the volatility and regulatory complexity of crypto make it an especially fiendish challenge. That makes CEO and founder Sam Bankman-Fried a particularly good subject for this edition of the Wisdom List, a series that asks epic founders to share their most impactful operational advice. Not only has Sam built what may prove one of this generation’s most consequential companies, he’s often done so by contravening accepted wisdom. I consider him one of tech’s truest first principles thinkers; this is his hard-earned wisdom.

What was the first thing FTX did 100x better than anyone else?

Manage risk. In mid-2019, when we started building FTX, the state of crypto derivative trading was really bad. Roughly a million dollars of customer funds were lost every day.

That happened because the different exchanges' risk engines were pretty terrible. Some of them wouldn’t operate for 12 hours at a time. When the market moved during those hours, customers that should have been margin-called weren’t, and accounts went negative. When the engine restarted, you only had bad options left. To make up for the shortfall, exchanges took money from profitable traders.

We thought we could build something much better. We designed a risk engine from first principles that operated 24 hours a day and proactively mitigated bad outcomes. It knows how much collateral is needed and when to make margin calls. It wasn’t trivial to build this – it was a little bit of dance to get it right – but it’s worked. We have basically no drawdowns and we fund them whenever they are incurred.

Getting risk right was our calling card when we first launched, and the thing people knew us for, for a long time.

How do you scale yourself?

There’s no perfect answer to this. The unfortunate truth is that it’s messy.

What I try to do is not let myself make excuses. My job as a CEO is to make sure the right things happen. It’s not something correlated with that; it is that. When you realize this, you start to understand what you need to do and the distances you need to go.

For example, I might tell a team member to do something I think will be beneficial for FTX. But my responsibility doesn’t end there. It only ends when the thing itself gets done. And if it doesn’t get done, it's not on my teammate – it’s on me. I need to do whatever it takes to get to where we want to go, even if it’s something I don’t know how to do. As a result, many of my days are spent learning something unfamiliar – diving into a new subject, talking to experts, and trying to figure out what’s happening.

The best way I’ve found to scale myself is to recognize that it’s my responsibility and that I need to be proactive about learning to make good things happen for our business.​
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In a meme

​​​​​​​​​​​​For the pictorially inclined, here's the whole piece — all 2,700 words of it — in a single meme.

Puzzler

​​​All guesses are welcome and clues are given to anyone that would like one. Just respond to this email for a hint.

Greg K proved to be The Generalist’s most rapid mathematician last time around. He untangled the conundrum at the heart of our previous puzzler. Other winners included Thomas K, Rishabh T, Dan M, Robert H, Abhishek V, Austin V, Joshua K, Ajay J, Abhinav J, Nico P, Shayon C, Tri I, Marc U, Jaey C, Xavier L, John G, Rich S, Lindsay G, Brian W, David P, Ankit J, Michael O, and Aiden L.

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The answer? The family has four sisters and three brothers. Well done to all who played. Wherever you are in the world, wishing you a lovely rest of your day.

Until next time,

Mario