Sam Bankman-Fried and the Psychology of Entrepreneurship

A photograph of Sam Bankman-Fried, founder of collapsed cryptocurrency exchange FTX. Bankman-Fried is seated wide-legged in front of a window through which skyscrapers can be seen. A blue banner, as used for an interview, is behind him. SBF gazes in the direction of the camera, and his hands are folded in his lap. He is a 28-year-old white man with unkempt, dark, curly hair. He is wearing a baggy black T-shirt and khaki cargo shorts. The photo accompanies a blog post about the personality of entrepreneurs and Bankman-Fried’s role in a particular kind of entrepreneurial culture.

The news about the spectacular collapse of the cryptocurrency exchange FTX and its 30-year-old multibillionaire founder Samuel Bankman-Fried raises some interesting questions. Who is Sam Bankman-Fried? What is Sam Bankman-Fried’s personality? Why did he behave this way? Let’s look at the personalities of entrepreneurs to explore some possible answers.

Who Is Sam Bankman-Fried? 

To understand the psychology of Bankman-Fried, it is useful to note that he belongs to a particular group of American businesspeople. Among them are Michael Milken, Jeffrey Skilling, and Bernard “Bernie” Madoff. Milken, an American financier, whose net worth is about $6 billion USD, was indicted for racketeering and securities fraud and spent time in prison. Skilling is a former McKinsey consultant and was the CEO of the failed energy trading company Enron. He was indicted for conspiracy, insider trading, and securities fraud and spent time in prison. Madoff, a financier and former chair of Nasdaq, once had a net worth of $64.8 billion. Madoff pleaded guilty to 11 federal felony charges and died in prison.

These men were all charming and socially skilled, intense, hardworking, and (for a time) very wealthy. They were also highly intelligent. For instance, in Skilling’s successful application to Harvard Business School, he wrote, “I am f—ing smart.” All of them were willing to ignore established rules and regulations while taking big financial risks, making them fearless in ways that few people are. Smart, charming, and fearless may sound like the description of a psychopath—except, unlike the typical psychopath (e.g., Al Capone), these men were well educated and had clear career focuses and professional identities.

These men can also be described as “entrepreneurs” who went too far in testing the limits—in professions where testing the limits is expected behavior.

The Personality of Entrepreneurs

Hogan has personality data on a sample of more than 500 entrepreneurs. Our data show that entrepreneurs (including Bankman-Fried) as a group are distinctive, with both expected and unexpected characteristics.

On our measure of everyday personality, entrepreneurs look like smart delinquents: bright, impulsive, edgy, colorful, and indifferent to authority. On our measure of dark-side personality characteristics, entrepreneurs look creative, which involves challenging norms. They also seem socially skilled (but not transparent) and somewhat duplicitous (delinquent). Most importantly, on our measure of values, entrepreneurs seem detail oriented, smart, analytic, risk seeking, norm defying, fun loving, and driven to win. It is surprising but important to note that they are not particularly motivated by money. They are much more powerfully motivated by fame, fun, and success, with wealth being a secondary consideration. 

Within a population of adventurous, norm-defying risk-takers, Bankman-Fried is unique only insofar as he is at the high end of the distribution of the characteristics that define entrepreneurs.

What Drives Entrepreneur Behavior?

Entrepreneurs are as necessary as they are troublesome. Entrepreneurs—as defined by our assessments—are essential for economic progress.

Creative Destruction

Capitalist (or free market) economies grow faster than regulated, managed economies and are how countries lift citizens out of poverty. The key feature of capitalist economies, as the great Austrian economist Joseph Schumpeter noted, is creative destruction. Economic progress depends on challenging norms, defying conventional wisdom, and disrupting standard practices. And creative destruction depends on a certain kind of leadership.

The Fall of Respectability

In his recent Wall Street Journal article, Adam Kirsch notes that modern entrepreneurs such as Steve Jobs, Elon Musk, and Sam Bankman-Fried have not only been disruptive, but have also abandoned respectability—and investors expect them to do so.

Being willing to ignore accepted standards of dress and behavior is the sign that the person is a disruptor. As Kirsch notes, “Silicon Valley has always looked for unicorns and disruptors, who by definition don’t respect the way that others do things.” Kirsch shares an anecdote about Jobs as an example: “One of the things that appealed to [Don Valentine, the founder of the investment firm Sequoia] about Jobs was that ‘he did a number of weird things . . . on purpose just to shock people.’”   

Kirsch contrasts the appearance and behavior of major players in the modern tech world (and Donald Trump) with the decorous appearance and conduct of old-school business giants such as Andrew Carnegie. Carnegie founded the Carnegie Steel Corporation in 1892 and became one of the richest men in US history upon its sale in 1901. In comparison, Sam Bankman-Fried famously negotiated a $200 million deal with Sequoia Capital in gym shorts with unkempt hair. The deal occurred during a Zoom meeting while Bankman-Fried was simultaneously playing the video game League of Legends.

The disheveled and ill-mannered Bankman-Fried seems to have come from a different culture compared to the well-groomed and well-mannered Carnegie. But what is going on beneath the surface?

A Socioanalytic Perspective on Entrepreneur Behavior

Our perspective on human behavior, socioanalytic theory, can help to explain. Socioanalytic theory fuses Sigmund Freud’s psychoanalytic theory, George Herbert Mead’s role theory, and Darwinian evolutionary theory. Socioanalytic theory holds that humans have always lived in groups with three universal motives. These are acceptance, status, and meaning.

Through this lens, all social behavior is a game during which the players negotiate for status and acceptance. After every interaction, participants’ reputations are slightly altered, either positively or negatively. Also note that, as Freud observed, all public behavior is a text to be interpreted. Finally, note that, as the ethologists point out, the essence of animal communication is deception.

With these observations in mind, we can conclude two things about the appearance and behavior of Carnegie and Bankman-Fried. First, both are putting on a carefully constructed performance—nothing about their behavior is spontaneous or natural. Second, both played to the same audience—namely, their investors—and not to the general public. Moreover, if their performances were discordant with the expectations of their intended audience, their enterprises would begin to fail. But most importantly, despite the superficial differences in apparent respectability, Carnegie and Bankman-Fried are much the same in underlying psychology: smart, analytical, competitive, audacious, and indifferent to the damage they might cause for others. 

This blog post was authored by Hogan Founder and President Robert Hogan, PhD, and Chief Science Officer Ryne A. Sherman, PhD.