Saturday, April 1, 2017

Con Men Bring Us Hope

Herbalife, Christianity, Scientology, and the Trump Network. Only I can connect the dots!

The New Yorker carried a remarkable article recently, ostensibly about Herbalife. That is the network or multilevel marketing company that makes its money luring would-be entrepreneurs to new careers selling a powdered food-related product, and charging them for every step towards their doom. The story was structured around a short that hedge fund star Bill Ackman attempted against Herbalife, thinking that a good dose of negative publicity could cause the pyramid scheme to collapse.

But the short ended in tears, as the stock recovered robustly and still trades at relatively high levels, with a respectable P/E of 19. It turned out that investors all knew the company was a scam. They didn't need to be pursuaded with flashy slides and conference calls. But getting the message to Herbalife's actual customers / marks was another matter, far beyond Ackman's PR capacity. The beauty of network marketing is that every person in the operation is motivated to spread the gospel. It is a theo-capitalist virus, made for growth on the back of desperate people's dreams.

Where were the regulators in all this? Well you may ask. The current Republican regime doesn't think much of any kind of regulation, representing, as they do, the predators of the system. The story brings up the extremely interesting tale of Donald Trump's own foray into network marketing, a window into his character like no other. This was an even more tenuous proposition, claiming to convey Trump's valuable business insights to its entrepreneur members, thereby allowing them to become rich in the wake of the 2008 recession. The scheme naturally ended up in court, then sold off to some other paragon of capitalism. What interest would such a person have in the victims of his form of capitalism? What credence should his voters have in his promises to help the little people?

Trump's character on display- always looking for a sucker.

Anyhow, the FTC did finally look into Herbalife, and issued a fine as well as directives to clean up its business. The fine was apparently sent to Herbalife distributors (who are also customers) who have been using it to buy more Herbalife products. The re-organization forced Herbalife to reclassify thousands of its distributors as customers so that it would have some customers actually buying products, instead of a multilevel network of distributors all selling down-line to suckers who thought they were also running a business. But naturally Herbalife found a way around this as well, spinning the whole thing as an FTC endorsement of their business model, and happy to putatively do the re-organization. Shares went up and all is well.
Herbalife is robust to whistleblowers, truth-tellers, the FTC, short sellers, and bad publicity in general.

The lesson from all this is that con men are virtually ineradicable, especially when we have toothless regulators. People are naturally, and necessarily, optimistic. America runs on optimism, yet optimism breeds the deceit and lies that are so easily passed off by psychopaths like Mr. Trump and the many other bottom-feeders of our competitive, capitalist system. Without regulation, a Gresham dynamic takes hold, honest business people can't make a dollar, and the entire system descends into a mire of curruption. Just look at the business climate in a country like Russia or Afghanistan.

But what if there are no regulators, because the con is not (ostensibly) business-related? What if a religion is being sold, with the most absurd visions of heavenly bliss (if you believe) and personal empowerment? Scientology started out as a sort of new-age psychotherapy. But when it met with derision from the from professional psychological community, and official sanction and bankruptcy for offering medicine (and selling E-meters) without a license, it was re-organized as a religion. Presto- not only could it continue as a quack medical cult, but it became tax-exempt as well! Now its members can believe in their hidden thetan abilities, purified "clear" states of consciousness, and extraterrestrial origins without skeptical questions from official bodies.

Religious cons are unimaginably more ornate and bold than business cons. Just think of the Jesus story. Who could have come up with such a thing? But given enough time, and enough idle dreaming and theological imagination, and, well, anything is possible. Now the entire world is saved, except for the non-believers who are all going to hell. We are so crushed by reality, so filled with hope that life should be better, and can be better if we only dream hard enough, that those who have crossed the line between reality and imagination have only to assert their confidence, for someone to believe them.

So the con men, mystics, and preachers, whether cynical, self-deluded, or psychopathic, make a matched set with the credulous, lost, and desperate. And aren't we all desperate, at some level? Desperate that this life, filled as it is with trials and pain, should be so difficult and end so definitively? What can the truth say about that? It is a perennial question, whether we put ourselves into the hands of yet another purveyor of hope, or practice moderation in this, as in so many other things.


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