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- [00:01]
A
What's up, guys? J.D. here. If you're a fan of listening to the podcast, you may also enjoy watching it. Today's episode has a bunch of visuals, so head over to JohnDavids.com YouTube and you can watch it on my YouTube channel. While you're there, hit subscribe and leave a comment. Let me know what you think. And of course, if you prefer to listen, stay right here. Okay, let's do it. You're listening to Making it with John Davidson.
- [00:32]
B
Just make this very straight. Was there commingling of funds? That's what it appears like. It appears like there's a genuine commingling of the funds that are of FTX customers that were not supposed to be commingled with your separate firm.
- [00:48]
C
I ain't knowingly commingle funds.
- [00:50]
A
November 30, 2022, 19 days after the bankruptcy of FTX. Look at his eyes. He isn't looking at the camera. He's looking down. Reports later confirmed he was playing a video game while giving this interview. He's treating a $32 billion fraud investigation like a side quest. This is Sam Bankman Fried, the con artist formerly known as sbf. He's a criminal, but before his company FTX imploded, he was probably one of the best brand builders in history. Today we're going to look at exactly how he did it. Then we're going to strip away the fraud and steal his playbook. So you can use these very effective strategies legally and ethically, just like every great business does. My name is John Davids. I'm the CEO of Influicity. Brands like these pay me lots of money so I can make them lots of money. And this video could make you lots of money. And it's totally free. So FTX starts in May 2019, and for context, that is late. Bitcoin had already been around for a decade. The market was crowded. But Sam builds this exchange, basically a website where you can gamble on crypto tokens. And he hits the gas. And what happens next is basically a speedrun of capitalism.
- [02:06]
D
How did you do this so quickly? I mean, your company is two years old and you're doing something like $400 billion worth of volume per month, which is 25 times what you did a year ago. How did you get the uptake at scale so fast?
- [02:25]
C
You know, it was really just a lot of small things put together, a lot of decisions that we've made around how to build the product, trying to be as responsive as we can to customers, to regulators, to counterparties, and you know, you know, honestly, from our perspective, it's. It sometimes feels like the world is just going sort of in slow motion around us and that we're going at, you know, about an average speed by our standards.
- [02:51]
A
In just 36 months, he takes FTX from a startup in a Hong Kong apartment to a $32 billion juggernau. He buys the naming rights to the Miami Heat arena. He puts his logo on the MLB umpires. He becomes the richest person under the age of 30. On paper, this kind of growth is mathematically impossible. You don't build a $32 billion company in three years just by having good software. You do it by hacking human psychology. So the first thing I want to look at is the outer layer that Sam paints onto this whole FTX thing. He calls it effective altruism. This episode is brought to you by my Playbook social media selling machine, available right now@johndavids.com playbook. Let's be real. You don't want likes. You want sales. You want to know that customers are going to show up every day from the content you're already posting. This Playbook shows you how that's done, how to turn social posts into cash flow, and how to scale in a way that's simple, repeatable, and on brand. Grab it free right now@johndavids.com playbook that's johndavids.com playbook. Now I want you to think about this. Most CEOs in crypto are trying to impress you with Lamborghinis, expensive watches and penthouses in Dubai. Sam does the exact opposite. He comes onto the scene in 2019 wearing baggy stained T shirts. He drives a beat up Toyota Corolla. He sleeps on a beanbag chair right next to his desk. And he does this straight through to 2021 when he effectively reaches godlike status in the industry. People are calling him the modern day J.P. morgan.
- [04:37]
B
They call him the J.P. morgan of crypto.
- [04:41]
A
Right, and this is all a weapon of mass distraction to make everyone believe that he's not really in it for the money, he's in it for the mission. And how do we know he's going to give all that money away? He knows that if he looks like a greedy banker, people are going to treat him like a greedy banker. But if he looks like a monk on the SP spectrum, they trust him. Watch how he answers this simple question about money. He doesn't talk about profit. He talks about this you're giving pledge.
- [05:10]
E
And what you're planning to give to.
- [05:12]
F
Yeah, totally. So you know, in the end, I want to give away basically everything that, that I make. And you know that that sort of comes from a number of angles potentially. You know, we're probably going to be giving somewhere between 100 million and a billion this year through the FTX Foundation. And you know, part of that is animal welfare, part of that is global poverty. A big piece that is looking at what might really change long term vision of the future.
- [05:39]
A
Did you catch that? He isn't selling a crypto exchange, he's selling a charity. He's selling a vision about how he single handedly is going to change the long term vision of the future. He even has reporters echoing his story for him, adding to the mythology.
- [05:59]
G
Ten years ago when, when he was in college, he decided that he wanted to dedicate his life to doing good for the world. And then after getting involved in this effective altruism movement, he decided that the best way to do that would be to get rich first and then give the money away. It's kind of like a thing that's growing more popular, but they call it earning to give. And he's gotta be like by far the most successful person who's ever pursued this because like 10 years later, now he's sitting on more than $20 billion.
- [06:33]
A
This is a brilliant move. By acting like the Robin Hood of crypto, he makes sure nobody checks his homework. Think about the psychology here. If a guy in a suit asks you for your money, your brain screams risk. You want to check his bank statements, you want audits. But if a nice kid with a nerd fro asks for money to save the world, you feel like a jerk for asking questions. You want to believe him. And this is actually a real business strategy. It's the mission. And real businesses use this to make it about more than just the product. You sell the why instead of just selling the what. If you sell cybersecurity software to small businesses, you say we're protecting a founder's life's work from being wiped out overnight. If you're a headhunter, you don't just say we're filling job openings, you say we're rescuing overworked teams from burnout. If you're a productivity coach, you don't just say, I'm teaching time management, you say, I'm giving working parents their evenings back so they can spend more time with their kids. Nike sells Victory. Harley Davidson sells Rebellion. Starbucks sells the third place between your home and your office. And Sam Bankman Fried sold effective altruism. And it worked. That's the first building block. Next, he solves a much bigger problem. And this is the part that makes him billions. See, having a mission gets people to like you. But it doesn't make them trust you with their life savings. And that's the problem. Our boy Sam is a messy 29 year old kid in the Bahamas. He has no track record, he has no history. In the financial world, trust usually takes decades to build. Sam needs to fast track that homeboy. Don't have time to wait. So what does he do? He physically forces his way into the rooms that matter. You see what he does here? This is association bias. Sam knows that when he stands next to a US president, your brain automatically upgrades his status. He becomes presidential by proximity. He forces you to see him as a peer to the most powerful people on earth. He does this over and over again. And that's just the first piece he needs to reach the masses. So he decides to put the world's most trusted people on his payroll.
- [08:55]
B
I call it the Wheel. I don't think so.
- [09:01]
D
What does it do?
- [09:02]
A
It grows. Yeah, so does a bagel. Okay, a bagel you can eat. One of the worst ideas I've ever heard, Brother David.
- [09:10]
E
Behold the fork.
- [09:13]
D
I got 10 forks right here.
- [09:14]
A
Benn. T bone.
- [09:21]
B
Is it the downstairs toilet again?
- [09:23]
A
Hello?
- [09:23]
C
Tom.
- [09:24]
B
Doggy coin. Sue Mark, Are you in? I'm in, I'm in, I'm in. All right, this last one might be tough.
- [09:32]
A
Nah, he loves you.
- [09:33]
E
Barbie's getting another dentist. This guy first. Even if you wanted to come back, we wouldn't take you.
- [09:38]
A
Yes you would.
- [09:39]
C
Yeah we would.
- [09:39]
F
You're right, we would.
- [09:40]
A
What's up?
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B
I'm getting into crypto with FTX.
- [09:42]
A
You in what?
- [09:43]
E
Providing gives 360 degree access to the crypto markets with the ability to trade everything from alts to defi. I believe I'm in, but still hate you.
- [09:51]
A
Understood.
- [09:51]
E
Take it. Best of the family. Is he in?
- [09:54]
C
Yep.
- [09:54]
E
Did he say he hates you?
- [09:55]
A
He did.
- [09:56]
E
Even on the phone that guy sounds handsome.
- [10:03]
A
Think about what is happening here. This is a psychological hack called trust transfer. Sam knows that. You don't know him, you don't trust him. But you trust Tom Brady. You trust Larry David. By associating FTX with them, Sam is literally downloading their reputations into his company. He's marinating FTX in that sweet Tom Brady juice. That didn't sound right. Look, your brain makes a subconscious leap. If Tom Brady the goat trusts this guy who looks like he sleeps in a tumble dryer, then it must be Safe. He essentially rents their credibility because he has none of his own. Now, obviously, Sam uses this to pull off a scam, but this is a real strategy to growing a brand quickly. Most new businesses make the mistake of trying to build authority from zero. They start a blog, they post on LinkedIn, and you should be doing that, but you can fast track it by borrowing authority. And you don't need hundreds of millions of dollars to hire Tom Brady. You just need to find the Tom Brady of your specific niche. Maybe it's a newsletter that all your customers read, or a podcast host that they listen to, or a YouTuber they trust. If you can get that person to vouch for you, you don't need to spend years proving you're good. Their trust rubs off on you instantly. Sam knows people are skeptical of crypto, so he pays the most trusted people in the world to tell you otherwise. But even with the mission and the trust, he still has one more hurdle. Our boy's gotta make it dangerously easy for you to give him your money. And that brings us to the final piece of the SBF web. And this one took me a long time to figure out. In fact, everything in this video took me a long time. So I'm going to ask you for one huge favor. If you're getting value so far and you want me to do more videos like this, go ahead and hit that like button. Subscribe to my channel and leave me a comment. What story should I cover next? Let me know and you just might see it here. Quick break. So I can tell you about Influicity. That's the little marketing agency I started in my apartment about 10 years ago. Well, fast forward. It is not so little anymore. Influicity works with some of the biggest brands in the world, building customer communities that drive revenue. We do this through influencers, podcasts, paid media, social media, content, AI and so much more. You can learn more@influicity.com and hey, while you're there, check out our case study. We have a lot of them. That's influicity.com okay, so now Sam has you. You like his mission, you trust his friends, but he still needs you to do the most important thing. He needs you to actually wire him your cash. And this is where SBF changes the game. If you remember using crypto exchanges back in 2018, they were horrible. They looked like spreadsheets, they were confusing, and you had to wait days to get approved. Sam looks at that and says, too slow. He basically looks at what Robinhood was doing. At the time for stocks, the confetti, the bright colors, the game, like, feel, and he decides to bring that to crypto.
- [13:11]
F
I think other things that really contributed to this, I mean, one of them is just, like, taking a step back and saying, all right, like, what, you know, what's the right thing to build in the first place? Like, where is there a real need? And, you know, sort of a combination of, like, there's a lot of demand and not enough supply of some product. And, you know, I think we felt like the exchange space was one of those spaces. You know, it's a place where there would. They really are one of the core pieces of infrastructure in the crypto ecosystem. And, you know, the exchanges circa 2018, they just weren't that good. And I think we sort of looked at that and, like, all right, there's a big opportunity here to really jump in, and that if we do, like, you know, and if we build a really great product, you know, we could pretty quickly become a pretty big piece of this space if sort of everything goes. Goes exactly right. And I think that, like, yeah, choosing the right place to come in was one piece of it. And then, you know, I, you know, feel a little silly saying this, but, like, building a great product, it's a thing that I feel like a lot of people legitimately sort of fail to emphasize nearly enough. But obviously it's incredibly important and it's working.
- [14:33]
A
FTX is fast. It's colorful. There are no warnings. Sam cuts the brakes. He makes depositing your life savings feel exactly like buying a skin in Fortnite, like you're throwing an extra pair of socks into your Amazon cart. He optimizes the whole thing for dopamine hits. In the industry, we call this gamification, but really it's just removing moving friction. It's taking something that the customer doesn't really want to do and actually making it fun. Sam knew that if he gave you time to think, you might realize that sending your life savings to a guy in the Bahamas who looks like he cuts his hair with a ceiling fan is a bad idea. So SBF takes away the thinking time. One click, boom, money gone. He makes it easier to lose $50,000 on his app than it is to order a Poke bowl on Uber Eats. Now, Sam did this so he could steal money faster, but it's actually something that you need to do, too, for the right reasons. And this is where most legitimate businesses completely fail. They throw up unnecessary walls between them and their customer. I see this all the time. I go to a client's website to buy something and I'm hit with four steps before I can check out. Or I want to make a reservation at a restaurant and it's like trying to renew your passport. JD doesn't want to create an account just to see if you have a table for two. Every extra click is a booby trap. Every extra form field is a stop sign. You are basically telling your customer, hey, I know y' all want to give me money, but first here's some paperwork. Friction kills sales, Period. If you want to grow like FTX without the prison sentence, you need to look at your own business and ask, how can I cut the steps in half? Where can I chop? Slim, delete, trim? If they have to click 5 times to pay you, make it 2. If they have to call you to get a price, make sure you answer your phone. Make it effortless because people are lazy. If you make them work to buy from you, they won't. They'll go somewhere else and forget you ever existed. And that doesn't just mean you lost a customer. It means you lost a customer, a repeat customer, a referral, a review, a case study, and all the other customers and revenue that would have come from that. You can't afford to lose customers. None of us can. So if there's something we can learn from this guy who looks like he's always ready for his grade two picture day, it's to focus on your product. So there you have it. The SBF Playbook. The Mission, The Borrowed Trust. The Frictionless Experience. Sam used all this to build a $32 billion fraud. But the tools themselves, they aren't evil. They're just effective. And if you use them for a real business, you're going to do great things. My name is John Davids. Get my best stuff to your inbox@johndavids.com this episode is brought to you by my Playbook website selling machine. Available right now@johndavids.com playbook. Most companies want websites that look nice. But a lot of nice looking websites don't sell. What you really want is a website that grabs attention, builds trust and turns visitors into buyers while you sleep. That's what this Playbook gives you based on 10 years of work we've done at Influicity, optimizing websites for 7, 8 and 9 figure brands. Download the Playbook now at johndavids.com playbook that's johndavids.com Playbook.