The end of benefit of the doubt for disruptive leaders
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Photo illustration: Shoshana Gordon/Axios. Photos: Jim Watson/AFP, Jeenah Moon/Bloomberg via Getty Images
"Can you give the guy a break?"— Netflix CEO Reed Hastings, after being asked about Elon Musk at the NYT's Dealbook Summit on Wednesday
No. We're in no mood to give Elon Musk a break. Nor ByteDance. Nor Sam Bankman-Fried. Nor, for that matter, the entire crypto industry. There's a new vibe in town, and it's unforgiving.
Why it matters: The past 40 years or so have been characterized by a laissez-faire "let a thousand flowers bloom" attitude toward business ventures. Now that attitude's downside is apparent, and the backlash has begun.
The big picture: The old theory was that of a typical VC fund. If you seed hundreds of ventures and most go to zero but a few show outsize returns of 100x or more, then both you and the broader ecosystem will prove very healthy.
- The catch: Such logic ignores the possibility of negative returns much larger than -100%.
- When failure involves massive negative externalities — depositors losing their money, say, or Russia finding itself capable of influencing the 2016 U.S. presidential election — large upsides must be weighed against potentially devastating downsides.
Between the lines: Die-hard crypto acolytes are furious at Sam Bankman-Fried, at anybody who'd give him a platform, and at anybody who believes him.
- They understand that the only way for crypto to survive the FTX implosion is to underbus Bankman-Fried individually, with extreme prejudice.
- After all, a world where Bankman-Fried might be telling the truth is a world where the entire asset class is inherently capable of spinning so far out of control as to endanger almost everybody exposed to it.
Be smart: That's more or less the view of the European Central Bank, which on Wednesday published an important blog post that pulls no punches when it comes to the crypto industry's massive hiring spree of former regulators.
- Regulation, notes the ECB, is tantamount to an official seal of approval — which means that the only truly effective way to regulate crypto is to refuse to regulate it at all.
- The "let it burn" philosophy certainly has the advantage of simplicity: The more that authorities place crypto beyond the regulatory pale, and refuse to let regulated financial institutions touch it, the less danger it poses.
Where it stands: Musk this week created and then destroyed the idea that Apple had threatened to remove Twitter from its App Store — an idea born of Apple's longstanding zero-tolerance policy when it comes to any shenanigans on its platform.
- App developers hate that policy, and the capricious way it's enforced, but they tend to grudgingly agree that it works well for Apple.
- Attempts to ban TikTok in the U.S. come from a similar place — no matter how much pleasure the app can bring to consumers, it could also pose an enormous geopolitical threat.
The bottom line: Banning a dangerous technology can be easier and more effective than fixing or regulating it. Expect that impulse to be indulged with increasing frequency.
