What made people trust that crypto guy?

Rhetoric’s most powerful tool, that’s what.

Crypto Man! For a very short time, Sam Bankman-Fried was a blockchain superhero.

Mop-haired recent billionaire Sam Bankman-Fried has just been indicted by the feds for wire fraud and conspiracy. Last month his cryptocurrency trading firm, FTX, managed to lose at least $8 billion within the course of a few days.

Which raises the interesting rhetorical question: Why did more than a million investors trust this guy in the first place? The answer comes from Aristotle, as answers often do.

Aristotle defined the three basic characteristics that make people like and trust a leader. He called them phronesis (practical wisdom), eunoia (disinterested good will), and arete (virtue). I call them Craft, Caring, and Cause. Let’s see how SBF employed these tools.

Craft:

 This is the quality that makes people believe you know what to do to solve a particular problem or lead in a particular field—such as the misty world of crypto, a type of currency that involves massive computer banks “mining” wealth by, essentially, solving puzzles. (Hey, I’m a rhetorician, not a tech guy.)

 SBF seemed almost genetically engineered for this arcane profession. The son of Stanford professors, he majored in physics at MIT and minored in math. Even before he graduated, he began working for the prestigious trading firm Jane Street Capital. At the tender age of 25, he co-founded a quant firm and soon began making vast amounts of money exploiting the difference in the price of bitcoin between Japan and America.

 He founded FTX in 2019 and—this is the rhetorical point—managed to attract more than half a billion dollars from venture capital firms; including Sequoia Capital, legendary funders of Apple, Google, PayPal, LinkedIn, and Zoom.

 Here was a guy who seemed uniquely suited to understand the arcana of cryptocurrency trading. The harder a field is to understand (and even the Nobel prizewinning economist Paul Krugman couldn’t figure out what crypto was for, exactly), the more an audience tends to trust the smartest guy in the room.  Crypto was both a problem and a potentially lucrative opportunity. Young SBF seemed like exactly the character who know how to solve it, and exploit it.

 Of course, we now know that SBF was, at best, a terrible manager. Few people in history have managed to lose more money in such a short time.

Caring:

People are much more likely to trust a character who seems to have their best interest at heart. And here SBF did something brilliant:

Unlike other crypto billionaires, many of whom are libertarians who hold Ayn Rand as their patron saint, the mop-haired mogul made nice with Congress. He actually encouraged some market oversight from the feds. SBF came off as the honest merchant in an ocean of pirates. His goal, he said, was to “bring greater investor protections” to ensure their economic security. Members of Congress ate it up. (It didn’t hurt that Bankman-Fried donated $40 million to Democrats.) Only later did he message a Vox reporter, “Fuck regulators.” His encouragement of regulation, he admitted, was just “PR.”

Cause: 

Here the leader appears to share his audience’s values, and to live up to those values. Bankman-Fried was a leading advocate of effective altruism, a utilitarian philanthropic movement that encourages rational thought about ends and means along with “longtermism.”  SBF said his purpose for gaining vast wealth was to give most of it away.

Corporations have used the Cause technique to sell everything from socks to petroleum. Politicians quote the Bible to show they share the values of evangelicals. Even the way you and I dress can be seen as virtuous (or unvirtuous).

Take SBF’s hair. Like Boris Johnson, SBF deliberately showed off his wild, um, coiffure. It made both men seem authentic, natural, like they were being totally themselves, careless of what shallow people might think of them. In reality, the hairstyle is a studied act of decorum, an attempt to fit in with an audience. I’m not a banker, Bankman-Fried’s fro says. Total wunderkind fashion statement.

Together, Caring, Craft, and Cause constitute the trifecta of ethos, a leader’s expression of character. As in all of rhetoric, the point is not whether the person actually embodies those qualities. The point is whether people believe he does. And a million investors, along with some very smart Silicon Valley VCs, clearly believed in SBF.

In all of rhetoric, let the buyer beware.