Saturday, May 12, 2012

Why Goldman Sachs would love The Syndicate.

Got a nice mention here, though Salty Droid deservedly got most of the "face time"...since he brings most of the salient and provocative information. I confess that I did not give this interview opportunity the prep time it deserved; to be fair to me, I couldn't spare the time at all, that particular week. If I'd prepped better, I could've contributed something more journalistically meaningful, at least in terms of my little corner of the SHAMsphere.

Now that I spend most of my day involved in finance (I'll explain in due course), it occurs to me how similar is the world of internet marketing to the world of the derivatives that nearly sank the U.S. economy in 2008 (and, for that matter, the world of Ponzi schemes as well): In both cases you have products that add little or nothing tangible to society but merely create another layer of financial participation in something that already exists (although full participation is reserved mostly for those on the inside). Neither of these activities, in IM or derivatives, really generates any new money; neither really expands the dimensions of the monetary pool. Both are just "clever" (to be kind) ways of redistributing cash in a zero-sum (or nearly zero-sum) game. In IM, that cash flows straight from thousands of hopeful marketing wannabes to the savvy, conscienceless types at the bloodless heart of the realm: The Syndicate, as they are known.

The derivatives that drove the economy into the crapper in 2008 essentially strove to quantify the beta of an underlying property (whose true value was known only to a few privileged insiders) in the same way that today's get-rich-quick internet-marketing schemes essentially sell the rights to a business model that consists of selling the rights to a business model.

Far too often in both cases, there's no "there there."


mikecane said...

I haven't read that Verge piece yet, but this pull quote grabbed me:

>>>Rather than develop something useful, Internet Marketers create something out of thin air

The same could be said about many, many consultancies (I have worked for a few).

Barnum would have loved this age!

Cosmic Connie said...

First off, Steve, congratulations for the mention in the Verge piece, and thank you for your contribution to the story. It was an important part of the article because you shed light on the main reasons people continue to fall for scams, and you summed up the way the scammers take advantage of our cultural narcissism.

You also make a good point in this post about the essential similarity between the financial perps and the worst of the IM scam marketers -- i.e., the fact that neither generates any new money or really creates anything of value.

I think that there is another important similarity as well: the defenses that the perpetrators employ, including the way they answer their critics.

The IM scammers (and other long-time scammy marketers, such as Kevin Trudeau, who wasn't mentioned in The Verge piece) insist that they *are* creating value and helping many people, and that those who would try to rein them in are interfering with their right to free speech as well as their God-given right to do business. They, the IM-ers, are being oppressed and repressed, in other words. That is strikingly similar to some of the whining financial-industry perps who insist that they create jobs and wealth and massive value, so they should be allowed to do whatever the hell they want.

And just as some of the more arrogant of the "1 percenters" accuse the protesting "99 percenters" of being lazy, willfully jobless losers who don't understand economics and finance, the IM scammers are going after their critics for being ignorant, jealous haters who don't understand how Internet marketing works.

Fortunately, it seems that more and more people are waking up to the scams on both fronts. I'm not sure if this trend is an indication of real or lasting change, but at least the piece in The Verge is a good beginning on the IM front.

Anonymous said...

MC / CC: Are not both money (new or old) and value, created out of thin heir and air, respectively?

Steve Salerno said...

Thin heir, thin air. I like it.

Cosmic Connie said...

Oh, I love puns too. And Anon does have a point about "value" being a subjective thing in many cases. People have the right to decide what has value to them and what doesn't. I get that. But the sleazy IM-ers present a distorted picture of the value of their frauduct or flopportunity from the beginning. They can be very convincing. Then of course if the customer doesn't become wealthy they're able to convince him or her that it's because he or she didn't work hard enough (or hasn't invested enough money in the scheme). Very often it's not a level playing field.

And even though value judgments are an individual matter, I think it's difficult for most of us to see the value in a get-rich-the-lazy-way or biz-in-a-box scheme that costs several hundred or a couple thousand dollars a month, with little or no return.

Speaking of which, it appears that Kevin Trudeau's infamous Global Information Network (GIN) MLM scheme is imploding. People aren't getting paid as they promised, former loyalists are questioning the veracity of KT's tall tales about having been a member of a secret society, and they're wondering why KT apparently continues to draw from GIN funds to support his own lavish lifestyle while other GIN members are struggling to pay the rent. Kind of predictable, but it's amazing how many people seem utterly shocked that KT was apparently lying to them.

Anonymous said...

"Then of course if the customer doesn't become wealthy they're able to convince him or her that it's because he or she didn't work hard enough (or hasn't invested enough money in the scheme). Very often it's not a level playing field."

Amazing, that's what the IMF says about Greece!