The Herbalife "Org" in Israel -- Same Old, Same Old

Kitch Alert: Tazchi Gozali's Herbalife's organization symbol.  Credit: Ha'aretz [see link below].

"I was a kid from Kiryat Ata [a poor town in Israel -- A.P.] Today I drive a car that costs as much as a house... those who bring money to invest here will succeed like I did... don't listen to your parents, they're dream stealers. People outside Herbalife are losers, making pennies, and want you to fail like they failed. Real friends support Herbalife; if they are critical, flush 'em. Haven't got money to invest? Take a loan from the bank..."

Sounds familiar? This, according to Haaretz [page in Hebrew], were common quotes in brain-washing "training seminars" passed by Israel's Herbalife "big man", Tzachi Gozali. If this sounds familiar, it should -- presuming that this is true, it is precisely the same sort of brainwashing technique used by other cults, in particular commercial cults like Amways' "orgs". 

"Redeeming Lawful Money"

Overview.  Among the newer scams to hit the usual sites - schemes which only work in the fevered or avaricious imaginations of those who advocate them - is "redeeming lawful money".  Its proponents begin with a federal statute - 12 USC § 411 - and spin out from there into the ozone.  This entry takes a look at it.  The subject has been discussed in some detail on the Quatloos board, where one of its major proponents has been allowed to expound on it in mind-numbingly repetitive detail.  Neither he nor anyone else has been able to cite a single verifiable instance where "redeeming lawful money" has ever accomplished anything.  It has, on the contrary, repeatedly crashed and burned.  Verifiably.

12 USC § 411.  In relevant part, that statute provides that federal reserve notes "shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank".  Proponents of "redeeming lawful money" draw two conclusions from this: that FRNs themselves are not "lawful money", and that "redeeming" your paycheck makes it non-taxable.  The first of those conclusions is wrong but understandable; the second is wrong and gibberish.

To understand the current version of the statute, one needs a little history.  The predecessor version of 12 USC § 411 was first enacted as 38 Stat. 265 in 1913. The U.S. was on the gold standard in 1913, "redeem" meant something very different than it does today, and the statute in so many words permitted redemption in gold. In 1934, the Gold Reserve Act nationalized privately-held gold bullion (not, obviously, ornaments and jewelry), and eliminated the provision of § 411 that permitted redemption in gold. However, there were still other forms of lawful money in circulation then - silver certificates, U.S. Notes, and perhaps one or two others (someone else can look it up). Those no longer exist today, but that provision of § 411 remains, basically an anachronism. The law contains many anachronisms. Everyone has seen the compilations of laws still on the books which do things like prohibit herding cattle on Main Street.

So, as to the first contention: proponents take the anachronism "redeem in lawful money" and infer that it means that FRNs are not "lawful money", something not completely illogical.  It's wrong, though.  "Lawful money" is not a phrase with a well defined meaning such as "legal tender".  FRNs are, of course, legal tender.  31 USC § 5103.  It is very difficult to see how, whatever "lawful money" may mean, something which is defined by statute as legal tender isn't also "lawful money".  The law requires a creditor to accept something that isn't money?  That's pretty nuts.

Plenty of courts have specifically held that FRNs are "lawful money".

Defendant argues that the Federal Reserve Notes in which he was paid were not lawful money within the meaning of Art. 1, § 8, United States Constitution. We have held to the contrary. United States v. Ware, 10 Cir., 608 F.2d 400, 402-403. We find no validity in the distinction which defendant draws between "lawful money" and "legal tender." Money is a medium of exchange. Legal tender is money which the law requires a creditor to receive in payment of an obligation.

United States v. Rickman, 638 F.2d 182 (10th Cir. 1980) (emphasis supplied).  There are many, many others.  For a few, see Poe v. C.I.R., T.C. Memo. 1983-312; United States v. Farber, 679 F.2d 733 (8th Cir. 1982); United States v. Ware, 608 F.2d 400 (10th Cir. 1979); Love v. Baldwin United Mortgage Co., 168 Ga.App. 361 (1983); Herald v. State, 107 Idaho 640 (1984); Brand v. State, 828 S.W.2d 824 (Tx App. 1992).  In fairness, there is a case in which the Third Circuit in dicta says differently.  United States v. Thomas, 319 F.3d 640 (3rd Cir. 2003).  A thread in Quatloos discusses that case in some detail.

But, ignoring the history and the law, there is nonetheless some logic in saying that, since FRNs can be redeemed in lawful money, they are not themselves lawful money.  Legally that's wrong, and historically it ignores how parts of statutes can become, through changing times and amendments to related statutes, anachronisms which no longer support that sort of inference.  But, just from the language of the statute, it's not illogical.

It's the next part where they sail off into the cream cheese.  One only arrives at the conclusion that 12 USC § 411 somehow renders otherwise taxable income non-taxable through logical knots of Gordian proportions.  Those knots includes things like monetizing debt, Treasury accounts, public money and private credit (or was that private money and public credit?), the Chinese, the Sanhedrin and logarithmic spirals superimposed on maps.  In other words, nothing that makes any sense.

Epic Fails.  On several occasions, people have actually attempted to make something out of nothing, by arguing "redeeming lawful money" in federal courts.  Below are seven examples.  Five have already crashed and burned.  Two are pending; this author has sufficient confidence in his conclusion that this stuff is nonsense that he posts them while they are still undecided.  It shouldn't be long before they, too, are ex-lawsuits.

(1) Michael David [Cress - these guys don't believe in last names] v. Geithner, 12-cv-3442 (CAND).  The complaint looks a whole lot like the ones in the cases below - virtually identical, in fact, down to the "refused for cause" notice of levy and the insistent "I am not pro se" and signature "Lawful money" on the civil cover sheet.  With no proof that he had even served the summons and complaint, Cress tries to file a "default judgment".  Judge Chesney of course refuses, and sua sponte directs him to show cause why she shouldn't toss the sorry mess into the trash (alright, alright, she said "dismiss").  Cress refuses the Court's order for cause.  Dismissed, sua sponte, about two months after Cress filed the action.  Short and sweet:

By order filed August 9, 2012, the Court directed plaintiff Michael David (“David”) to show cause, in writing and no later than August 31, 2012, why the above-titled action should not be dismissed for failure to state a cognizable claim against defendant Timothy Franz Geithner, the Secretary of the Treasury.

On August 15, 2012, David filed a copy of the Court’s August 9, 2012 order, on which copy David had written “Refused for Cause.” David has not otherwise responded to the Court’s August 9, 2012 order, and, in particular, has not shown cause why the above titled action should not be dismissed.

Accordingly, for the reasons stated in the Court’s order of August 9, 2012, the instant action is hereby DISMISSED without leave to amend.
The Clerk of the Court is DIRECTED to close the file.
IT IS SO ORDERED.

Bye.

(2)  Scott Daniel [Macneilage - see above] v. Geithner, 12-cv-1781 (CACD).  Same gibberish complaint and RfCs.  This is a relative biggie - the total (tax, interest, penalties) is $175K.  Macneilage appears to be a cut above the others - at least he actually served Geithner.  Of course, he also RfCs everything in the docket.  Dismissed, July 5, 2012, four months after Macneilage filed it.  Macneilage files eight RfCs after the dismissal.  Maybe they're his grocery lists.

(3)  Jesus Victor [Rodriguez - see above] v. Geithner, 09-cv-1091 (CASD).  I'm not linking to every complaint - they're all the same anyway.  Dismissed April 2, 2010.

(4)  Alvin Ruiz v. Geithner, 09-cv-1332 (CASD).  Dismissed less than four months after filing.

(5)  Patrick Teruo [Walsh - see above] v. Geithner, 09-cv-1644 (CASD).  Dismissed about six months after filing.  In the order, the Court noted that "Mr. Teruo’s complaint is a frivolous, stock complaint that he downloaded from the internet, and that other federal courts have summarily dismissed."  The complaint is just like the others.

(6)  Todd Donald [Weiss - see above] v. Geithner, 12-cv-4493 (CAND).  Same gibberish complaint, same notice of levy refused for cause, only filed a couple of months ago.  Weiss has already "refused for cause" two orders - discovery schedule and referral to M-J.  Nothing more yet.  Maybe Judge Illston's chambers can speak with Judge Chesney's.  Hint to wackos: you don't get to refuse orders, for cause or not for cause.

(7)  Denise Elizabeth [Lam - see above] v. Geithner, 12-cv-7719, CACD.  The complaint is exactly like the others.  It varies between laughable and incomprehensible.  Documents attached to it show that the IRS is threatening her with penalties for frivolous filings.

So, ladies and gentlemen, here we have real-life, unredacted proof that "redeeming lawful money" fails every time.  If anyone tells you otherwise, demand the same.  And then don't hold your breath.

1-9-13 update: Yesterday Judge Illston dismissed Weiss' action.  That's 0 for 6.  Lam's case is still pending, as are the motions to dismiss it.  There is therefore still no evidence that "redeeming lawful money" has ever done anything at all, other than to allow interest and penalties to accrue - and enforcement actions to continue - on unpaid taxes.

2-9-13 update: The last surviving effort at "redeeming lawful money" goes down in flames.  A couple of weeks ago, Judge Snyder dismissed Lam's complaint (see above for link).  Since this is the last case standing, we might as well quote the entire order:

Plaintiff’s complaint is largely incomprehensible and rambling. The Court cannot discern what claims for relief it is attempting to assert, nor on what factual (sic) plaintiff seeks relief. A “complaint that is ‘obviously frivolous’ does not confer subject matter jurisdiction. . . .” [citations omitted]. Dismissal for lack of subject matter jurisdiction is proper when the federal claim is “so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy.” [citation omitted].

The manifest insubstantiality of the present complaint deprives this Court of subject matter jurisdiction. This jurisdictional defect could not be cured by amendment.
Accordingly, the Court hereby DISMISSES this action with prejudice.

IT IS SO ORDERED

In other words, Lam's complaint - the one the purveyors of this nonsense provide to "redeem lawful money" - is such gibberish that it does not even give a court jurisdiction to consider the issue.  That's not easy to accomplish.

That's 0 for 7.  Despite numerous requests, those who advocate "redeeming lawful money" have refused to provide verifiable proof of a single success, so we had to find these seven cases on our own.  None left - every single one has been ignominiously dismissed, frequently sua sponte.  Anyone who uses this monumentally silly idea deserves what s/he gets: liens, levies, continuously-accruing interest and penalties, a judicial determination that the position is nonsense, and no relief whatsoever.

Since we began showing how this "process" does nothing but collect penalties, those who push it have come up with a new tack: they knew all along that the cases would be dismissed.  They only told the poor schmucks to file cases in order to provide them with an "evidence repository".  Don't believe them?  Think it's an ad hoc excuse for abject failure?  Au contraire.  It's actually written in stone on a plaque attached to the bridge they want to sell you.

It isn't worth much time debunking "the dog ate my homework".  Still, a couple of points: The only thing filing a document proves is that it existed on the date is was filed.  Period.  It doesn't prove that it does anything; after all, the above seven people filed complaints, all of which were dismissed.  Whether a document existed at a certain time is almost never an issue.  If you have a letter from the IRS, you have a letter from the IRS; if they deny it, they look like idiots.  If you need proof that you served a document outside of litigation, you get either a return receipt (if served by mail) or an acknowledgment or affidavit of service (if served in hand).  Paying to open a court docket just to hold papers serves no useful purpose, and the court may not permit it in the first place.  But yes, lawyers do have "evidence repositories".

They're called "files".

Business Porn

Credit: Janine Avila

Why do people read all those books about MLMs? Or "how to become a millionaire in business" books -- sold for $19.95, and found in the "half price" bin? (As G. K. Chesterton said, these books about success are written by people who cannot even succeed in writing books.) Michael Kinsley, in Curse of the Giant Muffins and other Washington Maladies, has the right idea. It is business porn.

What is the difference between pornography and erotica (apart from the fact that what I enjoy is tasteful erotica and what they enjoy is dirty porn, I mean)? Well, porn is fake, a simulation. The same is true for business porn: books which explain to you that making money is the only thing that exists and nothing else matters -- not character, not knowledge, not even achievement itself. (As Kinsley notes, "upward failure" -- failing in one venture after another and then still getting bigger and better jobs -- is quite common among American business executives.) People who buy these books think that there is some gimmick that will make them rich, if only they have the correct "attitude", or correct smile and business etiquette, or correct PowerPoint presentation, or correct desk calendar or electronic "time management" gadget. All that really matters in those books is not to actually be successful, but to fake being successful. Just like in porn, it's not love, or even passion, that matters, but faking it.

One example, Kinsley notes, was one Tom Peters, who rode the wave of the "management by excellence" books in the 1980s. Well, excellence is important in business (duh), but this was business porn. It wasn't about actual excellence -- actually doing things that made one's company's achievements better than others -- but about simulating excellence (which is about as much fun as simulated sex or simulated orgasms). It was about management by hugging random employees to show that you care, of management by randomly hanging around the office's water cooler to obey the "management by by wandering around" lesson from the In Search for Excellence course, and above all, having a heavy desk calendar made of leather to show just how busy you are.

Kinsley notes that Peters actually offered at one time an A Year of Excellence 1985 leather-bound calendar, with time marked in light blue for "wandering around" and hugging and congratulating people. On January 30th, 1985, for example, they were supposed to do that from 2 PM until 4 PM. Have you noticed the millions of new millionaires who were instantly created by this method in 1985? Me neither. Perhaps because truly excellent managers didn't just stop whatever they dealt with and started waking around randomly congratulating and hugging co-workers because as desk calendar said so. Or perhaps because, in a less tolerant age, men were wary of setting aside time for prowling around the office looking for Dick and Tom to hug while reeking of leather, which might have given people an entirely wrong idea of their intentions.

Kant and MLMs

Immanuel Kant. Credit: Wikipedia.

A quick note this time. Immanuel Kant noted that it is immoral to use people as mere means to an end. For example, murder is wrong since you use the person you kill merely as a means to whatever end you wish to achieve by their death (say, getting away from a crime scene, eliminating a witness, etc.)

Can you think of any business where "we are using you merely as a means to an end" is more true than in an MLM? Not only does nobody care about what happens to those in the "downline" (so long as they keep promoting the upline's goal of making money), but their training material actively encourages you to exploit friendships and personal relationships to get the person in your downline -- that is, to actively turn relationships based on caring to one based on exploitation.

The MLM Plague Abroad

Credit: Tipskey

Well, MLMs are arriving all over the world. Guess what? As in the USA, they too are dealing mostly with "lotions and potions" which are ludicrously overpriced.

Here, for example, is an Israeli one. It is the usual scam: there are no salesmen or workers, there are only "executives". Which, in this context, is a nice word for "salesmen who work for free". (But hey, you rather be an up-and-coming executive than one of those lousy salesmen or exploited workers, now wouldn't you?). There is tons of talk about "the environment" and "health" (they're doing this to save the world, you see). Of course the web site is full of talk about the "business opportunity".

But, naturally, no mention of the prices of the stuff they sell.

Well, small-minded dream-stealer that I am, I happen to know what the price is, from a personal acquaintance who was propositioned by a new "executive" of this (or perhaps a similar) MLM. A litre (a little more than a quart) of their noni juice is now promoted @ 150 N.I.S. per litre

Currently, the most expensive fruit juice I could find in an Israeli supermarket costs about 20 N.I.S. per litre (link in Hebrew to a site which compares prices). Most cost 10-15 per litre. Soft drinks cost about 5 N.I.S. per litre.

Real Tax Protestors... and Chess

Photo Credit: War tax protesting history web site (click for larger photo)

You might know, from my other blog, that I am interested in chess. Well, just for the heck of it, I searched on the Internet for "tax protester AND chess" (yes, yes, I know the "AND" operation here is unnecessary) -- and, quite surprisingly, found something quite enlightening.

I was referred to the Wikipedia page about Ralph Ginzburg. Turns out he conducted a famous 1962 interview with Robert "Bobby" Fischer, who later won the world chess championship, ending Russian domination of the field since the Russian emigre Alexander Alekhine won the title in 1927, or, less dramatically, since the Soviet master Mikhail Botvinnik won the world championship in 1948.

The late Ginzburg, most famous for publishing Eros magazine (link NSFW as it contain some nudity, but is not a porn site), was also a tax protester. Surprising, you say? Well, he was a real tax protester. He protested the war in the Writers and Editors War Tax Protest (scroll down for details, but the web site is well worth reading).

Some major differences between the two groups -- the real tax protesters and the fake ones, the tax deniers who call themselves "protesters":

1). The real protesters didn't deny they have a legal obligation to pay income tax. They knew they were breaking the law and expected to be punished for it. Unlike the tax deniers, who think they aren't legally bound to pay taxes.

2). The real protesters didn't think they shouldn't pay any tax. They specifically limited their protest to refuse the particular share of their taxes that went directly to a purpose -- the Vietnam war -- they thought they cannot morally support. This unlike the tax deniers, who don't actually "protest" anything the government does with the taxes, but simply the fact that they pay tax at all.

3). The real tax protesters didn't think people should get some sort of special veto power and only pay taxes for purposes they like. The correct way to deal with a tax that goes towards a purpose you think is wrong is, they would surely agree, almost always to elect as legislator someone who would repeal that tax. It is only in what they consider a very extreme case (in their view) that the duty to pay taxes is overruled. This as opposed to tax deniers who latch to any annoying or stupid government use of tax money as "proof" one should not pay taxes.

One need not agree with their anti-Vietnam war views to agree that their "yes, we need to pay taxes, but in this particular case we won't and break the law since it's morally important" is quite different than the "don't wanna, don't hafta, not gonna" attitude of the tax deniers.

Zero Income 1040 Nonsense Again

Image: L. A. Times

Sometimes, people declare that one can pay no income tax by filing a 1040 "zero income" form. They buy into buy into all kinds of phony baloney nonsense about being able to just magically say one has "no income" on the 1040 and then not pay income tax any more.

(Important notice: People who really have no income, or income below the threshold set by the law, usually do not file a return at all, as they do not have to. Sometimes they file a legitimate 1040 "zero income" return to "be on the safe side" -- say, if they are students who lived at their parents' home and didn't work that year. I am not talking about them now, of course, but about bogus "zero income" filers.)
 
The fact that the most famous promoter of this scheme, Irwin Schiff, is now in jail for filing such returns and actually tried to get off from serving jail time by telling the court his claim that 1040 zero returns work is evidence he is legally insane (scroll down to the Feb. 4th post in the link), might get some people to doubt the validity of the 1040 "zero filing" trick.

That, however, is not the subject of this post. My issue is something else: The IRS sometimes ignores the 1040 "zero income" returns and treats them as if the taxpayer didn't file a return at all, and uses a 6020 assessment (the substitute for return where the IRS files an income tax return instead of the taxpayer who didn't) to estimate their tax liability. Well, naturally, the tax deniers scream and holler the IRS is doing wrong. Unconstitutional! Evil!

This argument, I think, shows very well the kind of magical thinking tax protesters love to engage in -- proof, once more, of their childish, silly nature.

1040 zero-filer fighting the IRS: "You aren't supposed to attack back THAT way, you evil IRS!!! Waaah!!!!" (Image credit: Mirandette's Martial Art Center).

First, like little kids, they ignore the substance, namely, that a bogus 1040 "zero income" is for all intents and purposes the same as not filing at all, and that it's quite legitimate for the IRS to treat it as such.

Second, again like little kids, they think that they are special -- that only they get to try and bend the rules, while it is evil and unconstitutional for the IRS to call them on it. That is, it is OK for them to attempt fraud by filing a bogus "zero income" return, but it is terribly evil for the IRS to treat the attempted fraud as such. Imagine!

Third, like little kids, they are shocked -- shocked! -- by the fact that this happens. Apparently they truly, really believed they found the magic word that will force the IRS to make them not pay taxes. Did I say, "childish"?

Fourth, they don't realize that -- like the man in the picture -- the IRS is actually doing them a favor by "fighting back the wrong way". By ignoring their nonsense and just assessing liability like they do for other non-filers, the IRS is treating them more leniently than it could -- i.e., it doesn't go after them trying to get a criminal conviciton for filing fraudulent documents (unless, like Schiff, you're a real dick about it.)

The IRS workers just ignore these mental children's magic words, tantrums, and screams, and get on with their work -- much like a parent is not likely to take a kid shooting him with a toy gun as attempted murder. The child is deeply insulted: why doesn't dad take me SERIOUSLY?! Well, count your lucky stars he doesn't, pumpkin.

Sounds Familiar...

Image credit: Monty Python's Life of Brian

From wikipedia, about zealots: "The zealots were a... sect... founded against Qurinius' tax reform... [they] say that God is to be their only Ruler and Lord".

...some things never change. Of course there are differences: the Roman taxes really were highly oppressive and the Romans, who famously did nothing for us, really were a government which, as far as Judea was concerned at any rate, was a government of "taxation without representation".

Is attachment to liberty a bad thing? Certainly not. But the problem is that love of liberty all too often is used merely as an excuse for sheer narcissism. The zealots, as is well known, didn't only fight the Romans; they were also terrorists who assassinated any Jew who they saw as a "traitor", which meant any Jew who considered war against Rome a bad idea. It wasn't "love of liberty" that was their motivation, it seems -- but love of themselves and intoleration to any opposite view. The result was as one would have expected: the zealots brought on the Jews an unmitigated disaster -- a war against the Roman empire, due to the belief that God is on their side and therefore they cannot lose, no matter what the objective facts are.

This sort of magical thinking -- common to many fanatical people throughout history, sometimes resulting in victory due to higher morale but, all too often, leading to catastrophe -- is typical of tax protesters, as well. Neither are real patriots, but narcissists who usually bring disaster on themselves and others, when reality stubbornly refuses to fit their ego-inflating fantasy of being one of the chosen.

Compare both groups to some real patriots, like the American founding fathers. First of all their goal was, however daring, realistic: they could, and did, actually defeat Britain. Second, their goal was liberty, not self-important revenge: no American was ever killed for being a British sympathizer, and after independence a general forgiveness of all those who were neutral or even wanted to remain part of the British Empire was declared. Just because they were relaistic moderates (well, compared to the zealots...) hardly means the American founding fathers were not lovers of liberty!

Penn and Teller do it again.

Image credit: wikipedia . 

Behind MLM blog notes that Penn and Teller see right through MLMs in the "Easy Money" episode of their scam-exposing show, titled, ahem, Bullsh*t!.

Highly recommended -- but slightly NSFW: language and, surpirsingly, sexual content.

You see, one of the MLMs they investigate is "pure romance", a company specializing in what their web site calls (wink wink, nudge nudge) "bedroom accessories".

Is Social Security a "Pyramid Scheme"?

Image Credit: http://abovethelaw.com/

Recently, there has been much talk in the news -- including by potential candidates for the presidency -- about whether social security is a pyramid scheme. The SSA's official response is here; numerous folks on the internet say it is lying.

The readers of this blog should be able to tell the answer. There are similarities between pyramid schemes and social security: the main one being that money is paid to those who are earlier in the system from those who are latecomers. But this in itself, however, is not enough to make something a pyramid scheme! Consider a private medical insurance company: on the whole, it pays those who joined years ago (and are now older and need more medical care) from the income (the premiums) of those who joined later (and are thus still younger and need less medical care). Does this mean medical insurance is a pyramid scheme? No.

Why? because, like social security and unlike MLMs, there is no need for the number of insurers to grow exponentially. There is no need for the number of young insured every generation to double for the medical insurance company to remain viable. If the ratio of workers to retirees -- or older to younger medically insured -- remained constant, or at least didn't rise above a certain level, then both social security or the medical insurance company could continue to go on indefinitely.

Does this mean there's nothing to worry about? Not quite.

Again, imagine, if you will, a medical insurance company founded in 1935 (like social security) with the motto, "we insure everybody!". Assume there were 10% of the population that was sick at the time. In theory it is quite possible for them to have charged enough premiums to cover the expenses of treating those who are sick. There is no logical necessity for the number of sick people in the population to increase. So long as it remains the same, or decreases, the company will remain viable.

But suppose the number of sick people, for some reason, rises a lot. That instead of 10% who are sick, you have 20% or 30% of the population who are sick. Naturally in this case the company might well go bankrupt if it continues to charge the same premiums and give the same benefits. But would that mean it's a pyramid scheme? No.

Replace "sick people" with "retirees" and "healthy people" with "workers" you see social security's problem: the constant growth of the ratio of retirees to workers. The reason? The increasing life expectancy. So, yes, social security cannot be funded in its current form indefinitely. It will probably have to increase premiums, or cut benefits, much like a private insurance company might. Or, perhaps more reasonably, it might raise the eligibility age for benefits -- after all, in 1935, the average life expectancy was barely above 60, so the number of those getting benefits was quite small.

Will Social Security reform in such a manner? Maybe. A further problem -- not applicable to a private medical company -- is that this might be politically difficult to do; unlike a private company, where the stock holders have an interest in maintaining long-term viability, with social security, anybody suggesting reform of social security will be crucified, no matter how reasonable the suggestion is. Imagine, if you will, a private insurance company which, for religious or other reasons, considers it an unshakable dogma that the premiums must not be raised and benefits must not be cut under any circumstances.

But if social security eventually fails, it will not be due to its pyramid structure (it is not a pyramid in that sense), but due to these problems -- much like a medical company might well fail if it continues to charge the same premiums and give the same benefits when 30% of those it insures are sick, as it did when 10% were.

The American Economy and Pyramid Schemes

Photo credit: www.theluxuryhub.com

Is the American Economy a pyramid scheme? The answer is, of course, "no". Nevertheless, there are some elements of a "pyramid" in it -- as in any economy -- and its viability depends on fighting them.

1). First of all there must be people interested in actually buying what Americans make. There are, of course -- but not enough, apparently, which is one of the reasons for the recession. The American economy cannot survive by everybody selling to everybody; something must be produced.

2). Second, one must not build one's "prosperity" on the sand of the "greater fool" theory, like the internet or housing bubble. Real estate prices, as well as internet companies' stock prices, were built on people buying something one knows is terribly overpriced with the expectation that someone else will buy from you.

3). One should, as far as possible, live within one's means (yeah, I know, I know -- none of us do, but you know what I mean...) Do not spend your money on shiny gadgets in order to impress people if it gets you into debt. It is hard enough to pay legitimate debt (like mortages or bills for food, medicine, education, etc.) without adding to it that extra payment for the hot car or big-screen TV you really want.

The list could be extended. But does this seem to have a familiar ring? Why, yes -- this is precisely the MLM business model. The weaknesses and problems of the American economy (or of any advanced economy): overspending, buying overpriced useless stuff so that others will buy it knowing it is overpriced useless stuff but hoping others will buy from them, a proportion of about 1:100 between the number of salesmen in the MLM in relation to the number of people who actually produce their product, etc., etc. -- is what MLMs are all about.

Even if there was no problem at all with MLMs legally or morally speaking, they would be economically worthless.

Vote For Me Yourself, and Bring 80 Others Who Will Do the Same...

Credit: Wikipedia

You know the political party you founded is in trouble when, in the founding ceremony, you have to resort to MLM BS mathematics to encourage the faithful.

Israeli politician Ehud Barak had recently founded a new political party, Atzmaut [Independence]. In the founding ceremony [link in Hebrew], he said (my translation):

In this room there are only 80 people... but if each one of them brings 80 people, and so on, we will get 20 mandates [out of 120 in the Israeli Parliament]. 

Barak's math is slightly off. If things do in fact go "and so on" four times, they will have not 20 mandates -- about 1,000,000 votes in Israel -- but 40,000,000+ votes. Unfortunately Israel's entire population is about 7,500,000.

Clown... er, MLM College

Credit: the Simpson Wiki

Well, it had to happen. A college is now offering a degree in Multi-Level Marketing. (Hat tip: Doc Bunkum on the Quatloos! forum).

From the article:

Will this new program boost enrollment at Bethany? The college currently enrolls just 592 students. But if 10 percent of those students enroll in the network marketing major — and they recruit 10 of their friends, and each of those friends recruits 10 of their friends … move over Harvard?

Wrapping Yourself in the Flag

There is the old saying that "wrapping yourself in the flag" is the way to get suckers to believe you are doing something for unselfish, patriotic reasons, when in reality you're just promoting yourself.

One example is this man -- who moved from homeless taxi driver to multi-millionaire, according to the stories (hey, and he wouldn't lie about that, now would he?). Now he wants to help you succeed, and achieve the American dream. Of course the way to do this is the usual "magical nostrums" MLM company, among other things. By the way -- a 60-capsule box of these magical pills (Omega-3 oil) costs somewhere between one and a half to two and a half times as much as competing non-MLM brands -- depending if you have the distributor's "special discount" or not.

No wonder he recommends, as a selling point, to tell people not "how much it costs, but how much it is worth -- after which the price will look very low!". But if he is such a succesful millionaire, why does he need to keep giving motivational seminars and recommend that people hawk overpriced MLM products as a road to riches?

Can't Prove a Negative...

Can you prove fairies and dragons don't exist? Huh?! Can you?!?!  (Photo source here)

In one of the replies to my previous post, I was asked by a conspiracy theorists where is my evidence that the Israeli mossad was not involved in 9/11. The mistake in thinking here -- very common among conspiracy theorists, including tax protestors -- is that they don't have to prove the mossad was involved in 9/11, it's enough for others to fail to prove it wasn't, in order for their view to be taken seriously.

This mistake is known as 'proving a negative'. It is by definition impossible to prove something does not exist. It is always possible there is some place you haven't looked. I can't prove dragons and fairies don't exist somehow, somewhere (perhaps on some other planet, or in a parallel universe). But that's no reason to take seriously the claim that they do.

Sorry, folks, it doesn't work that way. Carl Sagan said it best: 'extraordinary claims require extraordinary evidence'. You make the positive claim, you provide the evidence. Nobody has any requirement to prove you are wrong; you have to prove you are right.

If you claim dragons and fairies exist, or that the mossad is behind 9/11, or that the income tax is a gigantic fraud by tens of thousands of people, it's not for me to prove these things are false and that no fairies, mossad conspiracy, or massive government fraud that has been going on for 100+ years. It's for you to prove these thing do exist. There is no point taking your claim seriously, otherwise.

The reason conspiracy theorists, from 9/11 "truthers" to tax deniers, constantly demand that someone prove to them 9/11 was not a conspiracy, or that the income tax is real, instread of defending their position by providing evidence it is correct, is simple: they can't do the latter, and thus presume that 'attack is the best defense'.

Dammit, Where is MY Part of the Action?

 

Many conspiracy theorists, tax protestors, etc., claim that "the zionists" or "the Jews" or someone similar rules the world. All this tax money illegally stolen is going to finance Israel, you see.

Well, here I am, living in Israel, Jewish, and so on -- and all I get from all this international Jewish conspriacy, which first was responsible for 9/11 and then for the ground zero mosque, not to mention controlling all of the world's money, is a big fat zero.

Where are the nubile gentile women to be my slaves? The oodles of money we are stealing from the gentiles? The power and glory?!

Somebody in the international Jewish conspiracy is holding on to my part of the stuff, I'm telling you.

MLM Income Disclosure

Ouch!

(Hat tip: "wserra").

One Thing I Don't Understand...

...is why the MLM promoters keep insisting that their particular MLM is perfectly legal, and not an illegal pyramid scheme like all those other MLMs.

Let's say they are 100% correct.

So what?

It's also 100% legal to take all your money and throw it into the sea, or to bang your head against a wall repeatedly, or to watch paint dry. Whether MLMs are legal or not is a red herring. What matters is whether they're a good investment of one's time and effort.

They aren't.

Money and Philosophy and Movies -- who is really to blame in MLMs

Here are two good movies about the things people would do for money -- including making a more or less dishonest buck:

The difference between the two movies?

In the first, back-to-the-wall generally honest real-estate agents will do anything to sell real estate, including getting good "leads" by more or less dishonest means. But their inter-office fights and hard-sale techniques, after all, result (at most) at a client getting real estate he doesn't really want at a price he doesn't really want to pay. In the second, a group of scammers deliberately inflate stock prices, unload it on unsuspecting people in a pump-and-dump scheme, and care not one bit about their "investors"' ruined lives.

We all met Glengarry Glen Ross like people in real life -- perhaps we are them in real life -- and it wasn't the end of the world. But touch the scammers from Boiler Room with a ten-foot pole and you're dead. The difference is that the Glengarry Glen Ross real-estate agents do it to survive and keep their job; those in Boiler Room do it to make as much money as they can. Aristotle's dictum holds true: 'The worst offences are made by those driven by greed, not by those driven by necessity'.

What does this have to do with MLMs? It illustrates the moral difference between those lower on the MLM pyramid and those at the top. The folks on the bottom do it under the delusional view that it's a small business. We already discovered why this is false, but still, at least their goal is to make some money because they need it. They might lie to you about the earning potential or how great it is to be in Amway (or whatever company), but they won't do serious wrong -- yet.

Those at the top, on the other hand, are different. They are sharks who are driven, not by necessity, but by greed. Many MLM "heads" are nothing more than professional scammers, setting up one MLM after another -- with themselves at the top, of course -- in order to squeeze as much money as possible from the gullible before moving on to the next MLM. They care nothing at all for their downline, let alone the MLM's (non-existent) customers.

So one of the risks of joining an MLM is not that you will fail, but that you will succeed: that you will become one of those at the top, and, for money, move from being someone who does a little wrong out of necessity to someone who does a lot of wrong, voluntarily, out of greed. For what will it profit a man, if he shall gain the whole world, and lose his own soul? (Mark 8:36).

On the other hand, perhaps you shouldn't worry. Chances of becoming one of the "top" when starting at the "bottom" at an MLM are 0.01% or so in the best case scenario, and de facto 0% in most case.

MLMs as a cult

Image credit: "How they Change your Mind" web site.

Are MLMs cults? We have the idea of cults as nutty folks who believe in the end of the world, UFOs, the end of the world by UFOs, and similar things. But in reality what makes a cult a cult is not so much what it believes, but its social structure and the interplay between members and leaders.

"Weird" beliefs alone are neither necessary nor sufficient to make a group a cult. E.g., Christian dogma might seem extremely odd to (say) Zen Buddhists and vice versa, but that in itself doesn't mean either Christianity or Buddhism are cults. On the other hand, groups that have core beliefs that are, in themselves, not necessarily odd, are sometimes cultic.

One often-ignore field of cultic behavior is that of economic cults. As a very informative web site notes, Amway in particular (and many MLMs) are cultic. The include thought control, dividing the world into "us" (in the MLM) and "them (all those who are not part of the MLM world), special jargon, etc. The point is to seperate the member from the world, so that he can be better exploited by the cult's leaders, in this case, the upline.

An example of what can happens when MLMs become a cult, as they often do, is found in the article "Shaking the Money Tree" by Amy Mills.

To be fair, certainly not all MLMs are cults; e.g., Avon or Tupperware are not, as -- however silly they might be as a way to make money -- they at least concentrate on actually selling products and do not require the seller to turn over their lives to the corporation. But it is a significant risk one should consider before one joins an MLM, in addition to the economic unfeasability of it.