"Binance Life" Book Notes Part Three | People change, relationships change, narratives change; only structure and interests will reveal the truth at critical moments.

CZ @cz_binance wrote about the first encounter with FTX's SBF and this segment with Gary Gensler, which is also quite interesting:

What I see is:

In the business world, positions are not fixed, relationships are not fixed, and even "friends and foes" are not fixed.

So, as the "Godfather" movie says: Never let the other party know your intentions before they get angry.

In the business world, what truly lasts over the long term are structures of interests, risks, and power. What you said about "there are no permanent enemies or friends, only permanent interests" is the first layer.

But there are several deeper layers worth learning here.

1️⃣ Do not understand the business world with "good people/bad people." Understand it with "positions/interests/constraints."

Relationships between people need room; do not make final judgments easily.

I have always resonated with a saying: Do not easily define anyone around you, as interests and human sentiments are always changing.

These pages just happen to reflect reality.

SBF came to seek investment from Binance, seeming like an entrepreneur seeking resources; later, FTX rose and became a competitor; then FTX collapsed, and many past relationships, interests, and alliances were re-evaluated.

Gary Gensler is the same.

In the early days, he was willing to meet, communicate, give advice, and even seemed quite friendly towards the crypto industry. Later, as he became the SEC chairman, his stance changed completely, turning into a strong regulator. This is not a simple "changing face."

Rather: when a person's position changes, their objective function changes.

The entrepreneur's objective function is growth;

the investor's objective function is returns;

the regulator's objective function is power, order, accountability, and political security;

the media's objective function is attention;

the public's objective function is searching for a narrative to explain the world.

So, mature judgment does not ask: Is this person a good person?

But rather asks:

What position are they currently in?

What interests drive them?

What constraints do they have?

If they change their stance, what would the cost be?

This is much more sophisticated than moral judgment.

2️⃣ In business collaborations, the most dangerous part is not that the other party is strong, but that you do not know their true chips.

Binance did not invest in FTX at the time, which seemed like a missed opportunity for a rapidly growing platform. But looking back, it might have been a form of protection.

Because FTX's real problem was not that its business growth was too slow, but that its underlying governance, risk control, fund segregation, and checks and balances had issues.

CZ mentioned that this is very worth learning: the faster a project runs, the more one must look at its braking system. Many people only look at projects by examining: how fast is the growth; how high is the valuation; how appealing is the narrative; how smart is the founder; whether there are top institutional endorsements.

But what truly matters is: Where is the money? Who can move the money? Are there checks and balances? Is the financial information transparent? Is risk control independent? Does the founder have unrestricted absolute power?

The lesson from FTX is: growth can create a halo, but governance structures determine life and death. This is crucial for assessing projects, collaborations, and investments.

3️⃣ The truly great figures don’t just seize opportunities, but more importantly, they can refuse opportunities.

In the few pages I read today, I found the most valuable lesson is CZ's restraint at that time, which is particularly rare.

SBF approached them for investment, and logically, this seemed like a tempting opportunity: young, smart, fast growth, large market potential, and there could also be some cooperation between exchanges. But Binance ultimately did not invest.

This reflects a very important capability: not all seemingly profitable opportunities should be participated in. Many people lose a lot of money not because they missed opportunities, but because after seeing too many, they lose their boundaries. In investment and business cooperation, the hardest decision is not to say yes, but to say no.

Especially when facing those: who seem very smart; who demonstrate very rapid growth; who have a very large market; who appear to have strong resources; who seem like missing out would be a mistake. It is indeed very challenging to remain unaffected by FOMO in such situations.

In summary: More opportunities are not necessarily better; the ability to filter opportunities is what truly counts.

4️⃣ "Regulatory relationships" are not a moat and may even be a source of risk.

FTX was very good at telling a story: they had excellent relationships with the U.S. policy circle, regulatory circle, and political sphere.

It was even packaged as the representative of "compliance crypto." But ironically, in the end, these relationships did not save them; instead, they became collateral damage after their collapse.

There is an important lesson here: being too close to power is not necessarily safe; it can also be exposing. Many crypto projects like to boast: we have regulatory resources; we know this or that official; we have good relationships with this or that institution; we are promoting compliance; we have political endorsements. These things can be advantages but must never be treated as a protective charm.

Because the essence of the power system is not friendship, but the shifting of responsibility and the slicing of risks. When you are riding high, it can provide you with a platform; but when you encounter problems, it may be the first to cut you off.

So what is truly reliable is not "who I know," but: Is my business itself clean? Is the funding safe? Can the structure withstand scrutiny?

5️⃣ Media narratives magnify "heroes" and "villains," but the real world is usually more complex.

Before the collapse of FTX, SBF was packaged as a genius, a savior, and a white knight for the crypto industry.

After the collapse, he was quickly repackaged into a fraudster, a villain, and a cancer in the industry. Both narratives are too extreme. It’s not that he has no responsibility, but rather the public narrative often serves not to understand the truth, but to rapidly allocate emotions.

When the market needs heroes, it creates heroes; when the market needs scapegoats, it creates villains.

So I am thinking, should I remind myself in the future when looking at any significant figure, major project, or event: Am I seeing facts now, or a narrative that has been packaged? Who does this narrative serve? What emotions does it want to evoke in me? What risks does it make me overlook?

This is also very important for my content creation. Because truly penetrating content does not follow the emotions but dissects the structures behind them.

6️⃣ For the crypto industry, the greatest risks often stem not from technology, but from human nature and governance.

FTX did not fail because of its matching engine or product experience.

It failed due to more ancient issues: greed; unchecked power; interest transfers; risk concealment; vague boundaries of customer funds; using growth narratives to cover governance defects.

Thus, this also reiterates: the crypto industry may appear new on the surface, yet the underlying risks are extremely old. Technologies may change their skins, but human nature does not.

On-chain, one may change the language, but the power structures do not change.

Tokens may have changed the way of financing, but Ponzi schemes, misappropriation, deception, and loss of control have existed for centuries. That is why, when conducting crypto research, one cannot focus solely on technology and narratives. It is more essential to look at: how money flows; how power is divided; how information is disclosed; who bears the risks; after an incident, who can escape and who is left to pay the bill.

7️⃣ The most valuable takeaway for me personally is:

I feel that these segments can ultimately settle into a judgment for my "trust database":

Do not be superstitious about relationships, do not be superstitious about smart people, do not be superstitious about growth, and especially do not be superstitious about regulatory endorsements.

What is truly worthy of trust is a structure that remains intact despite changes in interests, positions, and after pressure tests.

Today, I continue to thank @cz_binance for "Binance Life."

This is my third piece of reading reflections. The first two are:

1️⃣ Prison Life Section: "Reading CZ's 'Binance Life' prison life pages left me, as a 'returning person,' in silence!"

https://x.com/Bitwux/status/2048327105235280083

2️⃣ Sequoia Capital and Binance Acquisition Section: "It is hard for people to judge whether something is a 'bad thing' or whether fate is helping you retain control."

https://x.com/Bitwux/status/2049325844611702886

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