Oddly enough, no commentator ever paid attention to the name of the building where the infamous Bernard Madoff exercised his talents. The epicenter of the global scam was located on the seventeenth floor of the Lipstick Building, a red granite skyscraper overlooking Third Avenue in Manhattan. This famous building in architectural manuals is named for its color and its bold form of lipstick tube.
One cannot dream of a more appropriate name and place to host the manipulations of a man who spent his entire career making up the performances of the funds which he managed on this obscure seventeenth floor. Fascinating floor indeed of a plush Manhattan skyscraper that attracted like flies greedy millionaires and charities that were in the wrong place to say the least. Madoff was a lipstick master who made contenders run for a glamorous spouse that turned out to be a fake.
I must confess that the ease with which people succumb to pyramid schemes leaves me speechless. I do not know what impresses me the most: the greed powered gullibility of clients or the undeniable ingenuity of these new breed of pharaohs. Anyway, pyramids and their guilty authors are still rampant. They even come to surge in unexpected places such as book publishing.
So far there were two ways to get one's book published. The mainstream way is that of the publishing house: You send your manuscript to the publisher and ... wait, wait... often forever. Most manuscripts are not read and end up in dust bins. This is why many authors try the second option, that of vanity publishing. You pay the publishing house to get published and pray that it will fulfill its residual task, namely market and promote your book. but, as everyone knows, promises commit only those who receive them!
Digital publishing has opened a third door: self-publishing. Nothing is easier than putting a manuscript online through a blog or an app such as Wattpad in the hope that it becomes a bestseller. Amazon gave this mode of publication a boost in offering authors self-publishing and distribution facilities through its Kindle program. Hundreds of thousands of authors, often rightly exasperated by the behavior of traditional publishing houses, have joined Amazon's self-publishing program. Indeed, instead of the meager 5% to 10% royalty of traditional houses, Amazon offers a 70% rate! A true bargain and a real snub to publishing houses and their avarice!
As far as I am concerned, I rather see a sort of pyramid, which cleverly capitalizes on the pride and greed of authors who feel unjustly banished from traditional publishing houses. The basic argument is that of success: with Madoff 10% rate of return , with Amazoff ;-) fame. Amazon makes its point with authors who indeed have passed the million downloads bogey. The wink is clear: it could be you, it must be you! The authors are rushing en masse and of course in the lot there will always be a winner that Amazon will hasten to praise thereby attracting new candidates. The truth is that most self-published authors sell only a few dozen copies purchased by ... their families and loved ones. David Weinberger puts it very nicely: "On the Web, everyone will be famous to fifteen people." A traditional publishing house would not survive with such sales. With the same numbers, thanks to its size, Amazoff is prosperous: 30% of the sales price charged to hundreds of thousands of Amazoffied authors is indeed good and quick money. Unlike Madoff, there is no fraud involved per se. The fast buck will however last as long as the pride of authors last. This is were Amazoff is a lot smarter than Madoff. A financial crisis was enough to dry up the flow of gullible investors and destroy Madoff. Pride comes in unlimited supply and, as a result, Amazoff may indeed compete with Ramses II!
Let us, however, avoid throwing pyramid stones at Amazoff only! Digital pharaohs are numerous these days: Uberoff, Faceboff, etc ... All are based one way or the other on some sort of pyramid dynamic. Take the example of Uberoff. With Uberoff, everyone can become his own boss, earn a living by becoming a taxi driver. Uberoff recruits hundreds of thousands of drivers around the world just like Madoff attracted investors to the Lipstick building. Uberoff's recruitment practices are indeed not that far from traditional pyramids as shown in a recent Newsweek article investigating its affiliation program: "It pays to have Friends. Get $250 for every friend that starts driving with Uber." On top of this bonus promises are made of an attractive income. Despite media campaigns that would turn a grizzly bear into a polar bear, Uberoff according its internal documents is not profitable. Not big enough says its CEO: the world is not ours yet. Who pays then? Investors who pour tons of dollars to help conquer the taxi planet. And, that's what is worrisome. The pyramid will stand on its own once a monopoly situation will be reached. For the moment being, investors do not ask questions. They flock as if they were magnetized by Uberoff's stratospheric successive valuations. We do not ask questions either. We flock en masse into a swap whose terms we do not have the faintest idea about: "cheaper now" against "trust Uberoff", "short term windfall" against "long term unknown". But, at the end of the day, do we really know the taxi planet we want to live in? Do the cabbies realize that the plan is already in place to swap them against self driving cars?
Faceboff also proceeds along some sort of pyramid scheme with the difference that the sinews of war is at the moment provided by advertising. The money from advertisers flock as they are convinced that Faceboff is where to invest money, that is to say as long as the "faces" continue to join and do not decide to go look elsewhere. I would be curious to know what all small advertisers (who make Faceboff big river) think of the advertising effectiveness of Faceboff. Here too, the stabilizing factor of the pyramid is the achievement of a monopoly, a situation that all the Net giants attempt to reach. Once again we flock en masse like flies on free honey. Maybe the fact that we are en masse acts a tranquilizer. This is not enough though to explain why we enter these swaps where the terms of the trade are so unclear not to say so unfair.
Every era has the pharaohs it deserves. Ancient Egypt had its builder pharaohs. The era of crazy finance gave us Madoff and the like. The digital gilded age is driven by pharaohs who dream bigger and bigger. What have they in common?: pyramids that for myself I call Faustian swaps: Free against our data. These swaps are gigantic. Faceboff is now the size of a continent in terms of its inhabitants. These inhabitants have all accepted to give away the (data) shop for free.
Pyramids of Egyptian pharaohs have held up rather well: they keep attracting tourists and archaeologists. I have however my reasonable doubt about the sustainability (of the pyramids / Faustian swaps) of the digital pharaohs. And, basically, it might not be such bad news. For, as a community, we are faced with companies that, besides the fact that they generate numerous collateral damage blithely violating many laws, try every loop possible to avoid paying taxes. They want us to be a gentle community but their behavior is far from being community driven. I fear they have learned too many odd swap tricks from the bank(st)ers who manage their rock and rolling IPOs.
You may find me suspicious and pessimistic. Again, I do not mean that fraudulent behavior is at stake. But, voilà, when leviathans keep telling me, "we are not evil," I do have a hard time! When they do not pay taxes but praise their charities, I have serious doubts. Despite being an entrepreneur myself, I hate monopolies. I hate being unfairly swapped!
Do yourselves a last favor: try to ensure that the Net pharaohs do not have the same sense of humor as Madoff. Go and check if by any chance they did not choose to host their activities in buildings with evocative names. This is no concluding joke: I myself noted that one of Amazoff platforms is named The Mechanical Turk. If words end up being the reality, this poor Turk tells you a lot about Amazoff's work vision!