Inside S.B.F.’s $12 Million Long Shot

Happy Wednesday.

Forgive me for coming to you a day later than usual, but I wanted to make sure I could share the backstory behind one of the most extraordinary political plays of the midterm cycle: How crypto king Sam Bankman-Fried spent a fortune to try to elect someone he had never met before. It is a uniquely 2022 story, one that ties together our topsy-turvy politics, the enormous ambitions of America’s tech titans, and the new financial center of gravity that is web3.

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Crypto billionaire Sam Bankman-Fried lost big on Tuesday despite airdropping a historic sum into a congressional race in Oregon. What was he thinking? The logic, the math, and the aftermath.

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THEODORE SCHLEIFER

It was after 11 p.m. on Monday evening, and Sam Bankman-Fried was concocting some potato-pepper-onion fake meat stir-fry in his Bahamas kitchen while regaling me with the origin story of his admittedly longshot political effort to spend about $12 million of his own money to elect a totally unknown Democrat named Carrick Flynn to Congress. Truth be told, S.B.F. had never even met the guy, but that didn’t stop the crypto billionaire from launching a record-shattering super PAC effort, spending more than any single outside group ever in a single House primary race. The unusual plan was befitting S.B.F., the electrified hair, perma-shorts-wearing FTX founder whose Spock-like utilitarian philosophy of effective altruism—using data and experimental design to maximize positive change—has generated both money-hungry excitement and deep suspicion in Democratic circles.

S.B.F., after all, had spent the past year engaged in perhaps the most ambitious political project from Silicon Valley, spending tens of millions of dollars to encourage Americans to adopt an eminently worthy, if somewhat esoteric, policy goal: preparing for the next pandemic. And yet by any objective measure, S.B.F. has been racking up losses—none more blatant than the one he registered on Tuesday night, when Flynn got clobbered in his campaign for the Democratic nomination for Congress in the southern exurbs of Portland, Oregon.

The Flynn race could have been a turning point for the 30-year-old mega-donor. Last summer, S.B.F. and his brother, Gabe, embarked on an extraordinary individual lobbying push to convince Congress to spend big to study future epidemiological threats. That effort has basically failed to date: the reconciliation bill last year didn’t include anything close to the $30 billion they sought for the cause. When the monster legislation got deep-sixed by Joe Manchin anyway, the Bankman-Fried brothers and their brain trust regrouped to develop Plans B and C.

The strategy had two prongs. The first was to make an end-run around Washington by sponsoring a pandemic-prevention initiative in California that will appear on the fall ballot, thanks to $12 million in contributions from the Bankman-Frieds’ pandemic lobbying group (and a $9.5 million boost from the philanthropy of Facebook co-founder Dustin Moskovitz, another effective altruist mega-donor). The second was to elect just a few candidates who would prioritize their pet issue in Congress, above all the other things that lawmakers can focus on. So earlier this year, S.B.F., in conversations with Gabe and his political advisor Michael Sadowsky, decided to kickstart his own super PAC, Protect Our Future, with an initial $9 million donation in February, followed by $4 million more in March. The goal was to find candidates who would prioritize pandemic preparedness over everything else.

The S.B.F. team ultimately identified and endorsed 20 candidates, some of whom won their primaries on Tuesday, but there were none more perfect or prioritized than Flynn, who had himself lobbied for the pandemic prevention measures in the reconciliation bill. Flynn would go so far as to say that pandemic preparedness was the core reason he ran for Congress. And priorities mattered to S.B.F. “Why isn't there more attention being paid to pandemic preparedness right now?” S.B.F. told me on Monday. “It's not because of the anti-pandemic preparedness lobby. It's not because legislators sit there and say ‘Ah, fuck it. Let's see what happens. No point in getting ready for it.’ There's not a lot of active resistance to it. Instead, the default for everything is inaction.”

S.B.F. and team subscribed to a Great Man Theory of sorts. Even if Flynn was the only one of their candidates to win, S.B.F. and Sadowsky thought, he could have massive expected value, the North Star for the effective-altruism movement. Congress would fund pandemic preparedness efforts, S.B.F. optimistically believed, “as long as there’s someone there, at least one person, who is going to make sure it doesn’t get silently dropped.”

That someone, more than anyone else they endorsed, was poised to be Carrick Flynn. But then on Tuesday, Flynn got creamed by a two-to-one margin by a state legislator, Andrea Salinas, despite his massive cash advantage. And indeed, there may be a lesson in Flynn’s loss for S.B.F., as well as for the Democratic Party at large, about the aftershocks of big-money politics. The decision to bankroll Flynn originated in the same math-first, optics-second principles that define their community of political philanthropists, where S.B.F. has achieved God-like status. But as Sadowsky told me, the process by which they spent $12 million or more on that single congressional race wasn’t some long-meditated strategy. It happened, as Hemingway once wrote of bankruptcy, slowly, and then all at once.

As it became obvious that Flynn fit S.B.F.’s unique paradigm, it also became obvious that his only chance to win required S.B.F.’s super PAC to go to unprecedented lengths on his behalf. The group said upon its February launch that it would spend “at least” $10 million on all primaries together. But it’s only May, and the group has now recorded $19 million in total independent expenditures—with nearly $11.5 million of that dropping in the Flynn race alone, multiples more than they’ve spent for any other endorsed candidate. The race was this year’s most expensive House primary so far.

Flynn, after all, had virtually no name I.D. or political relationships in the Portland suburbs. In the parlance of effective altruism, which calls for donors to support causes that are important, tractable and neglected—or I.T.N.—Flynn’s campaign was certainly “neglected.” And so S.B.F.’s group backed up the truck. S.B.F. said he himself was only involved at a high level in the decision to spend so much on Flynn, and it is not as if his donations to the super PAC were explicitly earmarked for the Flynn race.

But the math in the expected-value calculation made a lot of sense for S.B.F., at least in theory. Sadowsky said the team did indeed run the math on how many lives and dollars could be saved per donated dollar by S.B.F., although he wouldn’t share it precisely. S.B.F., much less circumspect, was game to spell it out, at least when it comes to the last pandemic: One determined Member of Congress could have had “a 10 percent impact” in convincing Washington to set aside $30 billion in federal budget to prevent $10 trillion in worldwide Covid-related costs, S.B.F. speculated. Given the payoff, I asked S.B.F. somewhat cheekily why not spend even more in the race. S.B.F. conceded that there are diminishing returns to even his television ads. In retrospect, after Tuesday, that was obviously true.

The other problem with spending such an insane amount of money was that the political project at times risked collapsing under its own weight. The money required to make Flynn competitive was unheard of in Oregon and, naturally, pissed off the state’s political establishment. “Carrick Flynn was not a name that anyone had heard of or knew of in Oregon. Zero. Nothing. Out of nowhere, you can’t just imagine—well, you probably can—what it's like to have $12 million in independent expenditures going into saturation TV,” Dan Petegorsky, a philanthropic consultant in Portland, told me last week, recalling the “many times a day, nonstop” that he’d suffer through Flynn ads. “Take away the money, I can’t even imagine he’s marginally competitive.”

And with so much outside money, Flynn had understandably been besieged for the last several months by questions from national and, more importantly, local press about his ties to S.B.F. I can’t count the number of quotes I’ve read from Flynn that resembled Barack Obama stiff-arming Jeremiah Wright. There were conspiracy theories galore, including, of course, plenty connecting the support to some crypto world takeover. The extraordinary outlay of cash, followed by an unusual, surprising endorsement of Flynn from the Pelosi-steered super PAC, House Majority PAC, triggered evidence-free allegations that Pelosi had perhaps spent on Flynn’s behalf just to do S.B.F., a major emerging player in Democratic politics, a solid. “I have no reason to think that’s true,” S.B.F. told me, “and I haven’t had any communication with them about that.”

All of this blowback was maddening to S.B.F. and his advisers, and I sympathize (S.B.F. said he took particular umbrage at being called “a tax-dodging billionaire.”) One of the most common misconceptions of big donors across the board, in my experience, is that they principally care about the parochial interests of their industry. No, most tech donors are not making candidate decisions based on how the candidates feel about Big Tech or antitrust issues or the blockchain. S.B.F. obviously has crypto interests—after all, he has donated to a different, independent super PAC that is backing candidates who are seen as pro-crypto. But the headlines that seek to pigeonhole the effective-altruist agenda as some backdoor to a pro-crypto agenda seriously miss the plot. (In a sign of the times, there was actually a different pro-crypto candidate that S.B.F. should have supported if this theory were true.)

Skepticism of big donors seemingly buying elections shouldn’t be surprising, but it is worth taking S.B.F.—who has given tons of interviews on his thinking, including with the FT and The Times over the last weekend alone—at face value. Still, I asked S.B.F. if he understood how much he had riled people up. “If I have one regret here, it’s on the communication side of this,” he told me. “In retrospect, I should have expected that people would try to take that angle and some people would believe it. I should have probably just made it louder and made it more explicit from the beginning why exactly I was excited about him.” Given the negative onslaught, I wonder if that made a difference.

There are surely other lessons for S.B.F. in the wake of Flynn’s defeat. But this isn’t the end of the story by any stretch. S.B.F. told me on Monday that it was plausible that, over the rest of the year, it “absolutely could be” that he spends two or three times the amount that he has already spent on the super PAC to date, which would bring his total outlay of cash into the neighborhood of $30 million. (S.B.F. has probably put more money into the super PAC over the last six weeks in still undisclosed contributions. The group may have been supposed to file a “pre-primary” report with the F.E.C. earlier this month, according to experts I asked, disclosing donations through late April, but did not. A group spokesperson said they’d be checking with the agency and file belatedly if needed.) Sadowsky, similarly, said he anticipated that the money spent on the Flynn race would not constitute a majority of the PAC’s spending when all was said and done. “We knew that if there were a lot of people who were likely to be champions for pandemic prevention, and there was a large value of spending in these races, then we'd be willing to go all in,” Sadowsky told me last week. “We also knew that we didn't expect to win everything. And that we're willing to make enormous bets that we might lose. And we're OK with that. This is ultimately an expected value play.”

S.B.F. and Sadowsky also say they are open to keeping the super PAC and their network humming after November as they try to pressure their candidates to keep their word in Congress. I wrote back in February that effective altruism’s impending crash into Washington will be one of the more combustible, entertaining storylines of big-money politics and philanthropy over the next decade, especially since its largest benefactor is only 30 and still learning on the job. Spending $12 million on a single candidate who lost badly is, by no definition, a success. S.B.F. didn’t score a Peter Thiel-like victory and successfully buy a seat in Congress for an ally. But you get the feeling that S.B.F., like Thiel, will be among the most ambitious members of the new establishment attempting—in this case, expensively—to recast the world in his image.

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