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It’s a lesson to remember as we watch the crypto space melt down, with ex-billionaire Sam Bankman-Fried

It’s not like perfidy in crypto was some hidden secret. At the top of the market, back in December 2021, I wrote a piece very explicitly saying that crypto was a set of Ponzi schemes. It went viral, and I got a huge amount of hate mail from crypto types

one of the more bizarre aspects of the crypto meltdown is the deep anger not just at those who perpetrated it, but at those who were trying to stop the scam from going on. For instance, here’s crypto exchange Coinbase CEO Brian Armstrong, who just a year ago was fighting regulators vehemently, blaming the cops for allowing gambling in the casino he helps run.

FTX.com was an offshore exchange not regulated by the SEC. The problem is that the SEC failed to create regulatory clarity here in the US, so many American investors (and 95% of trading activity) went offshore. Punishing US companies for this makes no sense.

many crypto ‘enthusiasts’ watching Gensler discuss regulation with his predecessor “called for their incarceration or worse.”

Cryptocurrencies are securities, and should fit under securities law, which would have imposed rules that would foster a de facto ban of the entire space. But since regulators had not actually treated them as securities for the last ten years, a whole new gray area of fake law had emerged

Almost as soon as he took office, Gensler sought to fix this situation, and treat them as securities. He began investigating important players

But the legal wrangling to just get the courts to treat crypto as a set of speculative instruments regulated under securities law made the law moot

In May of 2022, a year after Gensler began trying to do something about Terra/Luna, Kwon’s scheme blew up. In a comically-too-late-to-matter gesture, an appeals court then said that the SEC had the right to compel information from Kwon’s now-bankrupt scheme. It is absolute lunacy that well-settled law, like the ability for the SEC to investigate those in the securities business, is now being re-litigated.

Securities and Exchange Commission Chair Gary Gensler, who took office in April of 2021 with a deep background in Wall Street, regulatory policy, and crypto, which he had taught at MIT years before joining the SEC. Gensler came in with the goal of implementing the rule of law in the crypto space, which he knew was full of scams and based on unproven technology. Yesterday, on CNBC, he was again confronted with Andrew Ross Sorkin essentially asking, “Why were you going after minor players when this Ponzi scheme was so flagrant?”

it wasn’t just the courts who were an impediment. Gensler wasn’t the only cop on the beat. Other regulators, like those at the Commodities Futures Trading Commission, the Federal Reserve, or the Office of Comptroller of the Currency, not only refused to take action, but actively defended their regulatory turf against an attempt from the SEC to stop the scams.

Behind this was the fist of political power. Everyone saw the incentives the Senate laid down when every single Republican, plus a smattering of Democrats, defeated the nomination of crypto-skeptic Saule Omarova in becoming the powerful bank regulator at the Comptroller of the Currency

Instead of strong figures like Omarova, we had a weakling acting Comptroller Michael Hsu at the OCC, put there by the excessively cautious Treasury Secretary Janet Yellen. Hsu refused to stop bank interactions with crypto or fintech because, as he told Congress in 2021, “These trends cannot be stopped.”

It’s not just these regulators; everyone wanted a piece of the bureaucratic pie. In March of 2022, before it all unraveled, the Biden administration issued an executive order on crypto. In it, Biden said that virtually every single government agency would have a hand in the space.

That’s… insane. If everyone’s in charge, no one is.

And behind all of these fights was the money and political prestige of some most powerful people in Silicon Valley, who were funding a large political fight to write the rules for crypto, with everyone from former Treasury Secretary Larry Summers to former SEC Chair Mary Jo White on the payroll.

(Even now, even after it was all revealed as a Ponzi scheme, Congress is still trying to write rules favorable to the industry. It’s like, guys, stop it. There’s no more bribe money!)

Moreover, the institution Gensler took over was deeply weakened. Since the Reagan administration, wave after wave of political leader at the SEC has gutted the place and dumbed down the enforcers. Courts have tied up the commission in knots, and Congress has defanged it

Under Trump crypto exploded, because his SEC chair Jay Clayton had no real policy on crypto (and then immediately went into the industry after leaving.) The SEC was so dormant that when Gensler came into office, some senior lawyers actually revolted over his attempt to make them do work.

In other words, the regulators were tied up in the courts, they were against an immensely powerful set of venture capitalists who have poured money into Congress and D.C., they had feeble legal levers, and they had to deal with ‘crypto enthusiasts' who thought they should be jailed or harmed for trying to impose basic rules around market manipulation.

The bottom line is, Gensler is just one regulator, up against a lot of massed power, money, and bad institutional habits. And we as a society simply made the choice through our elected leaders to have little meaningful law enforcement in financial markets, which first became blindingly obvious in 2008 during the financial crisis, and then became comical ten years later when a sector whose only real use cases were money laundering

, Ponzi scheming or buying drugs on the internet, managed to rack up enough political power to bring Tony Blair and Bill Clinton to a conference held in a tax haven billed as ‘the future.’

The important thing to remember amid all this, and the thing that has changed the game when it comes to the free speech/content moderation conversation, is that Elon Musk himself loves conspiracy theorie

The media isn’t just unduly critical—a perennial sore spot for Musk—but “all news is to some degree propaganda,” meaning he won’t label actual state-affiliated propaganda outlets on his platform to distinguish their stories from those of the New York Times.

In his mind, they’re engaged in the same activity, so he strikes the faux-populist note that the people can decide for themselves what is true, regardless of objectively very different track records from different sources.

Musk’s “just asking questions” maneuver is a classic Trump tactic that enables him to advertise conspiracy theories while maintaining a sort of deniability.

At what point should we infer that he’s taking the concerns of someone like Loomer seriously not despite but because of her unhinged beliefs?

Musk’s skepticism seems largely to extend to criticism of the far-right, while his credulity for right-wing sources is boundless.

This is part of the argument for content moderation that limits the dispersal of bullshit: People simply don’t have the time, energy, or inclination to seek out the boring truth when stimulated by some online outrage.

Refuting bullshit requires some technological literacy, perhaps some policy knowledge, but most of all it requires time and a willingness to challenge your own prior beliefs, two things that are in precious short supply online.

Brandolini’s Law holds that the amount of energy needed to refute bullshit is an order of magnitude bigger than that needed to produce it.

Here we can return to the example of Loomer’s tweet. People did fact-check her, but it hardly matters: Following Musk’s reply, she ended up receiving over 5 million views, an exponentially larger online readership than is normal for her. In the attention economy, this counts as a major win. “Thank you so much for posting about this, @elonmusk!” she gushed in response to his reply. “I truly appreciate it.”

the problem isn’t limited to elevating Loomer. Musk had his own stock of misinformation to add to the pile. After interacting with her account, Musk followed up last Tuesday by tweeting out last week a 2021 Federalist article claiming that Facebook founder Mark Zuckerberg had “bought” the 2020 election, an allegation previously raised by Trump and others, and which Musk had also brought up during his recent interview with Tucker Carlson.

If Zuckerberg wanted to use his vast fortune to tip the election, it would have been vastly more efficient to create a super PAC with targeted get-out-the-vote operations and advertising. Notwithstanding legitimate criticisms one can make about Facebook’s effect on democracy, and whatever Zuckerberg’s motivations, you have to squint hard to see this as something other than a positive act addressing a real problem.

It’s worth mentioning that the refutations I’ve just sketched of the conspiratorial claims made by Loomer and Musk come out to around 1,200 words. The tweets they wrote, read by millions, consisted of fewer than a hundred words in total. That’s Brandolini’s Law in action—an illustration of why Musk’s cynical free-speech-over-all approach amounts to a policy in favor of disinformation and against democracy.

Moderation is a subject where Zuckerberg’s actions provide a valuable point of contrast with Musk. Through Facebook’s independent oversight board, which has the power to overturn the company’s own moderation decisions, Zuckerberg has at least made an effort to have credible outside actors inform how Facebook deals with moderation issues

Meanwhile, we are still waiting on the content moderation council that Elon Musk promised last October:

The problem is about to get bigger than unhinged conspiracy theorists occasionally receiving a profile-elevating reply from Musk. Twitter is the venue that Tucker Carlson, whom advertisers fled and Fox News fired after it agreed to pay $787 million to settle a lawsuit over its election lies, has chosen to make his comeback. Carlson and Musk are natural allies: They share an obsessive anti-wokeness, a conspiratorial mindset, and an unaccountable sense of grievance peculiar to rich, famous, and powerful men who have taken it upon themselves to rail against the “elites,” however idiosyncratically construed

f the rumors are true that Trump is planning to return to Twitter after an exclusivity agreement with Truth Social expires in June, Musk’s social platform might be on the verge of becoming a gigantic rec room for the populist right.

These days, Twitter increasingly feels like a neighborhood where the amiable guy-next-door is gone and you suspect his replacement has a meth lab in the basement.

even if Twitter’s increasingly broken information environment doesn’t sway the results, it is profoundly damaging to our democracy that so many people have lost faith in our electoral system. The sort of claims that Musk is toying with in his feed these days do not help. It is one thing for the owner of a major source of information to be indifferent to the content that gets posted to that platform. It is vastly worse for an owner to actively fan the flames of disinformation and doubt.

Most A.I. researchers agree that models trained using R.L.H.F. are better behaved than models without it. But some argue that fine-tuning a language model this way doesn’t actually make the underlying model less weird and inscrutable. In their view, it’s just a flimsy, friendly mask that obscures the mysterious beast underneath.

In a nutshell, the joke was that in order to prevent A.I. language models from behaving in scary and dangerous ways, A.I. companies have had to train them to act polite and harmless. One popular way to do this is called “reinforcement learning from human feedback,” or R.L.H.F., a process that involves asking humans to score chatbot responses, and feeding those scores back into the A.I. model.

Shoggoths are fictional creatures, introduced by the science fiction author H.P. Lovecraft in his 1936 novella “At the Mountains of Madness.” In Lovecraft’s telling, Shoggoths were massive, blob-like monsters made out of iridescent black goo, covered in tentacles and eyes.

@TetraspaceWest said, wasn’t necessarily implying that it was evil or sentient, just that its true nature might be unknowable.

And it reinforces the notion that what’s happening in A.I. today feels, to some of its participants, more like an act of summoning than a software development process. They are creating the blobby, alien Shoggoths, making them bigger and more powerful, and hoping that there are enough smiley faces to cover the scary parts.

“I was also thinking about how Lovecraft’s most powerful entities are dangerous — not because they don’t like humans, but because they’re indifferent and their priorities are totally alien to us and don’t involve humans, which is what I think will be true about possible future powerful A.I.”

when Bing’s chatbot became unhinged and tried to break up my marriage, an A.I. researcher I know congratulated me on “glimpsing the Shoggoth.” A fellow A.I. journalist joked that when it came to fine-tuning Bing, Microsoft had forgotten to put on its smiley-face mask.

@TetraspaceWest, the meme’s creator, told me in a Twitter message that the Shoggoth “represents something that thinks in a way that humans don’t understand and that’s totally different from the way that humans think.”

In any case, the Shoggoth is a potent metaphor that encapsulates one of the most bizarre facts about the A.I. world, which is that many of the people working on this technology are somewhat mystified by their own creations. They don’t fully understand the inner workings of A.I. language models, how they acquire new capabilities or why they behave unpredictably at times. They aren’t totally sure if A.I. is going to be net-good or net-bad for the world.

That some A.I. insiders refer to their creations as Lovecraftian horrors, even as a joke, is unusual by historical standards. (Put it this way: Fifteen years ago, Mark Zuckerberg wasn’t going around comparing Facebook to Cthulhu.)

If it’s an A.I. safety researcher talking about the Shoggoth, maybe that person is passionate about preventing A.I. systems from displaying their true, Shoggoth-like nature.

A great many people are dismissive of suggestions that any of these systems are “really” thinking, because they’re “just” doing something banal (like making statistical predictions about the next word in a sentence). What they fail to appreciate is that there is every reason to suspect that human cognition is “just” doing those exact same things. It matters not that birds flap their wings but airliners don’t. Both fly. And these machines think. And, just as airliners fly faster and higher and farther than birds while carrying far more weight, these machines are already outthinking the majority of humans at the majority of tasks. Further, that machines aren’t perfect thinkers is about as relevant as the fact that air travel isn’t instantaneous. Now consider: we’re well past the Wright flyer level of thinking machine, past the early biplanes, somewhere about the first commercial airline level. Not quite the DC-10, I think. Can you imagine what the AI equivalent of a 777 will be like? Fasten your seatbelts.

@thomas h. You make my point perfectly. You’re observing that the way a plane flies — by using a turbine to generate thrust from combusting kerosene, for example — is nothing like the way that a bird flies, which is by using the energy from eating plant seeds to contract the muscles in its wings to make them flap. You are absolutely correct in that observation, but it’s also almost utterly irrelevant. And it ignores that, to a first approximation, there’s no difference in the physics you would use to describe a hawk riding a thermal and an airliner gliding (essentially) unpowered in its final descent to the runway. Further, you do yourself a grave disservice in being dismissive of the abilities of thinking machines, in exactly the same way that early skeptics have been dismissive of every new technology in all of human history. Writing would make people dumb; automobiles lacked the intelligence of horses; no computer could possibly beat a chess grandmaster because it can’t comprehend strategy; and on and on and on. Humans aren’t nearly as special as we fool ourselves into believing. If you want to have any hope of acting responsibly in the age of intelligent machines, you’ll have to accept that, like it or not, and whether or not it fits with your preconceived notions of what thinking is and how it is or should be done … machines can and do think, many of them better than you in a great many ways. b&

@BLA. You are incorrect. Everything has nature. Its nature is manifested in making humans react. Sure, no humans, no nature, but here we are. The writer and various sources are not attributing nature to AI so much as admitting that they don’t know what this nature might be, and there are reasons to be scared of it. More concerning to me is the idea that this field is resorting to geek culture reference points to explain and comprehend itself. It’s not so much the algorithm has no soul, but that the souls of the humans making it possible are stupendously and tragically underdeveloped.

When even tech companies are saying AI is moving too fast, and the articles land on page 1 of the NYT (there's an old reference), I think the greedy will not think twice about exploiting this technology, with no ethical considerations, at all.

@nome sane? The problem is it isn't data as we understand it. We know what the datasets are -- they were used to train the AI's. But once trained, the AI is thinking for itself, with results that have surprised everybody.

The unique feature of a shoggoth is it can become whatever is needed for a particular job. There's no actual shape so it's not a bad metaphor, if an imperfect image. Shoghoths also turned upon and destroyed their creators, so the cautionary metaphor is in there, too. A shame more Asimov wasn't baked into AI. But then the conflict about how to handle AI in relation to people was key to those stories, too.

this is like if Russell Moore came out and said that, on the whole, Christianity turns out to be a bad thing. It’s that big of a deal.

Thompson’s case centers around constraints and supply, particularly as they apply to content creation.

In the pre-internet days, creating and distributing content was relatively expensive, which placed content publishers—be they newspapers, or TV stations, or movie studios—high on the value chain.

The internet reduced distribution costs to zero and this shifted value away from publishers and over to aggregators: Suddenly it was more important to aggregate an audience—a la Google and Facebook—than to be a content creator.

Audiences were valuable; content was commoditized.

What has alarmed Thompson is that AI has now reduced the cost of creating content to zero.

what does the world look like when both the creation and distribution of content are zero?

Hellscape

We’re headed to a place where content is artificially created and distributed in such a way as to be tailored to a given user’s preferences. Which will be the equivalent of living in a hall of mirrors.

What does that mean for news? Nothing good.

It doesn’t really make sense to talk about “news media” because there are fundamental differences between publication models that are driven by scale.

So the challenges the New York Times face will be different than the challenges that NPR or your local paper face.

Two big takeaways:

(1) Ad-supported publications will not survive

Zero-cost for content creation combined with zero-cost distribution means an infinite supply of content. The more content you have, the more ad space exists—the lower ad prices go.

Actually, some ad-supported publications will survive. They just won’t be news. What will survive will be content mills that exist to serve ads specifically matched to targeted audiences.

(2) Size is determinative.

The New York Times has a moat by dint of its size. It will see the utility of its soft “news” sections decline in value, because AI is going to be better at creating cooking and style content than breaking hard news. But still, the NYT will be okay because it has pivoted hard into being a subscription-based service over the last decade.

At the other end of the spectrum, independent journalists should be okay. A lone reporter running a focused Substack who only needs four digits’ worth of subscribers to sustain them.

But everything in between? That’s a crapshoot.

Technology writers sometimes talk about the contrast between “builders” and “conservers” — roughly speaking, between those who are most animated by what we stand to gain from technology and those animated by what we stand to lose.

in our moment the builder and conserver types are proving quite mercurial. On issues ranging from Big Tech to medicine, human enhancement to technologies of governance, the politics of technology are in upheaval.

Dispositions are supposed to be basically fixed. So who would have thought that deep blue cities that yesterday were hotbeds of vaccine skepticism would today become pioneers of vaccine passports? Or that outlets that yesterday reported on science and tech developments in reverent tones would today make it their mission to unmask “tech bros”?

One way to understand this churn is that the builder and the conserver types each speak to real, contrasting features within human nature. Another way is that these types each pick out real, contrasting features of technology. Focusing strictly on one set of features or the other eventually becomes unstable, forcing the other back into view.