Some day we'll get a pyramid scheme that actually works
Addicted to gambling —FOMO-inducing crypto campaigns—FTX poised to be confirmed as Ponzi scheme
Ticket No.3 is a short, weekly newsletter format from The Alpine Review, where we share three things that drew our attention. If you only want to hear when the next Alpine Review is ready, you can opt-out of Ticket No3 here.
Act one — Gambling
For a dollar and a dream
I enjoyed this recent New Yorker piece by Kathryn Schulz on gambling, which seems to be an industry growing to alarming proportions. I had no clue this was such a huge industry, worth $91 billion.
One in two American adults buys a lottery ticket at least once a year, one in four buys one at least once a month, and the most avid players buy them at rates that might shock you. At my local store, some customers snap up entire rolls—at a minimum, three hundred dollars’ worth of tickets—and others show up in the morning, play until they win something, then come back in the evening and do it again. All of this, repeated every day at grocery stores and liquor stores and mini-marts across the country, renders the lottery a ninety-one-billion-dollar business. “Americans spend more on lottery tickets every year than on cigarettes, coffee, or smartphones,” Cohen writes, “and they spend more on lottery tickets annually than on video streaming services, concert tickets, books, and movie tickets combined.”
Act two — Get-rich-quick schemes, crypto edition
Fortune favors the brave
Reading the piece above, I was reminded of this story from last February in the New York Times titled: Why Is Matt Damon Shilling for Crypto?. The article connects gambling, crypto and a culture which has taken a nasty turn; a system where tech start-ups compete in the open to entice the unwary with get-rich-quick schemes:
The bleakness of that pitch is startling. In recent weeks, while watching televised sports — where the Crypto.com spot airs repeatedly, alongside commercials for other crypto platforms and an onslaught of ads for sports-gambling apps — I could not shake the feeling that culture has taken a sinister turn: that we’ve sanctioned an economy in which tech start-ups compete, in broad daylight, to lure the vulnerable with get-rich-quick schemes. Yet what’s most unsettling about the commercial is the pitch it doesn’t make. Traditionally, an advertisement offers an affirmative case for its product, a vision of the fulfillment that will come if you wear those jeans or drive that truck. This ad doesn’t bother. It shows a brief glimpse of a young couple locking eyes in a nightclub — an insinuation, I guess, that crypto has sex appeal. But the ad builds inexorably toward that final shot of Mars, where Matt Damon’s astronaut was marooned in a hit film and where Elon Musk, the world’s second-richest man and a crypto enthusiast, says he plans to build a colony to survive the end of civilization on Earth.
We live in troubled times. The young, in particular, may feel that they are peering over the edge, economically and existentially. This ad’s message for them seems to be that the social compact is ruptured, that the old ideals of security and the good life no longer pertain. What’s left are moonshots, big swings, high-stakes gambles. You might bet a long-shot parlay or take a flier on Dogecoin. Maybe someday you’ll hitch a ride on Elon Musk’s shuttle bus to the Red Planet. The ad holds out the promise of “fortune,” but what it’s really selling is danger, the dark and desperate thrills of precarity itself — because, after all, what else have we got? You could call it truth in advertising.
Obviously, you read something like this and you want to know what the commenters (i.e. real world) have to say. Here’s a sample:
Act three — Ponzi schemes
Some day we'll get a pyramid scheme that actually works
Which brings us to the story du jour: digital asset platform FTX/Alameda is collapsing after it warned of a “significant liquidity crunch”, and failed to secure a bailout from fellow crypto exchange Binance (to be rebranded “Bye, nance”?). Not that this was completely unexpected…
Back in April, Bankman-Fried (SBF) describes yield-farming platforms (which FTX offers) as, basically, a Ponzi scheme:
“This is a valuable box as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they’re wrong about that?”
When Levine heard that, he gave one of the best interviewer responses I have ever heard:
"I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described [yield] farming. You're just like, well, I'm in the Ponzi business and it's pretty good."
Later, in May, SBF conceded in a lunch with the FT interview (a particularly good one) that much of crypto is, basically, bullshit:
“My basic sense is that by volume or market cap, most of crypto is real. But by number of tokens most of it is bullshit.
Some excellent specialist investigative work outlined earlier this month in broader details the structural problems at FTX:
It seems we’ve veered into what feels like a scheming economy , where opaque stratagems are designed to attract people with modest means, which in turns fuels this sense that “the system is rigged” against them, in turn fueling broader hitting at the core of society —— A worrying trend.
Crypto is pretty complicated but you know what’s simple? Google Meet.
I call them tickets because they opened a door in my mind and briefly turned me into an investigator, wanting to know more. Perhaps they will have the same effect on you.