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There is one particular detail in the FTX saga that I can’t stop thinking about. It’s not the salacious stories about polyamorous relationships at the cryptocurrency exchange, the criminal charges against Sam Bankman-Fried or the senior lieutenants now co-operating with the authorities, although all these things are compelling. The bit that stays with me is that Bankman-Fried’s father, Joseph Bankman, facilitated at least one introduction for a former student to his son’s crypto trading business.
What confuses me is not that Bankman promoted his son’s company — it’s that anyone took him up on it. Bankman is a legal academic and a leading scholar of tax law. Taking advice from him about the viability of a cryptocurrency business would be like taking counsel from him about how best to fix your plumbing. FTX debtors are now suing Bankman and his wife, Barbara Fried, quoting statements in which Bankman described FTX and Alameda as “a family business”.
There are many successful family businesses: Lachlan Murdoch has just taken control of one. But the crucial and, I would have thought, obvious, difference is that Rupert was involved in the family business first. If a trading firm needs to use one of its founder’s fathers as an impromptu extra member of staff, that, to me at least, suggests the business is not well-run or particularly successful. At the point you can sponsor a sports team to the tune of $135mn, you really ought not to be relying on your parents to make introductions for you.
I understand why a parent might not realise this. I don’t want to upset any of the parents in my social circle, but when I think of the relationships between the mothers and fathers I know and their children, the words that come to mind aren’t “objective”, “level-headed” or “rational”. They often struggle to identify when they are treating their kids as if they are still babies. And this is a good thing. Parents should, and mostly do, take a more favourable view of their children than other people.
But if an adult past 30 is using their parents to seek advice from family friends rather than picking up the phone themselves, that, to me, suggests that you are not dealing with an adult who you might want to go into business with. Even if it turns out that there was absolutely nothing untoward about FTX and how it operated, it is almost never a good idea to work with someone who at that age needs their dad to introduce them. It is one thing for a parent to believe their adult son is a baby. It’s quite another for the adult to be happy to be treated like one.
Bankman and his wife are incredibly ordinary in one way, at least: they are two successful people, married to someone in a similar field. (Full disclosure: I also fit that description, though we do not have children.) This is a consequence of one of the great social advances of the second half of the 20th century: women have been able to stay in the workplace for longer and rise higher.
One of the knock-on effects is an increasing number of children who have two parents with impressive jobs, therefore doubling their prospects of having their own careers jump-started with a helpful phone call. This boosts the ability of successful parents to tilt the playing field in favour of their offspring.
How should organisations and policymakers respond? The challenges posed by the children of incredibly successful people are knotty: inevitably, they do just have a better grasp of their parents’ jobs than those of other people. Even when no one tilts the scales illegitimately, nepo babies are hard to compete against.
A study by Meta’s research arm found that there was a higher probability of someone entering a job similar to their parent’s relative to the general population, while educational charity The Sutton Trust suggests that the UK has entered an era of limited upward social mobility. Periods of high “social mobility” have always been a bit of a mirage — they tend to happen when growth has created more opportunities. In low-growth societies, the influence of the power parent is always going to be more influential.
Still, expecting parents not to go all out for their children is, I think, essentially asking people not to be people. Yes, some individuals are sufficiently committed to workplace fairness to shut their own kids out, but not very many. It is far more reasonable to put the onus of anti-nepotism policies on everyone else in society. It’s asking a lot less of me to have the good sense to politely ask that your son or daughter make their own way in the world, than it is to expect you not to try and open a door for them in the first place.