And the thing is: it can work! For a time. Which is why people keep signing up. As long as you find a supply of new marks, the current participants in the scheme can make money. Then, their expanding bank balances become themselves the best enticement for luring in new marks. And the cycle goes on. This, then, is the first answer to the question with which we began. Why do people keep reinventing the pyramid scheme? Because it works. Some people get rich from them, just as some people get rich from slot machines. As long as you are early enough in and early enough to pull out, you personally can make bank, even though the majority will always lose money in the end.
So that's explanation number one for the popularity of crypto fads and other pyramid schemes: the sheer material rewards they hold out. Watching a Netflix documentary last night with my parents about the collapse of a Canadian crypto exchange that turned out to be simply a classic Ponzi scheme (no crypto was actually ever being sold back to users; rather, the cash they transferred in was being used as gambling money to trade on other exchanges), one sees examples of the YouTube videos that drew people into the crypto markets.
The archetypal story in one of these videos is of the average bro just like you who spent a mere one hundred dollars to buy a Bitcoin in 2013 (and which of us doesn't have at least a hundred dollars lying around?) and ended up making 20,000. If they could risk so little and get so much in returns, why not try your own luck on one of the new cryptocurrencies? It's the logic that has emptied millions of wallets at millions of gaming tables the world over. Because of course, there is always the sliver of a chance—in any highly volatile and speculative market—that you back the right horse and then withdraw your funds before the value crashes. But you are more likely to be one of the innumerable others who has wasted money you'll never get back.
So, perhaps the desire to get rich quick, and the human willingness to play the odds due to our personal optimism bias, needs no special explanation. But still I wonder: why is it that U.S. society seems so uniquely prone to developing variations on this same old scam? After all, we are not the only country on Earth that worships wealth and power. But not all of them are so prolific of pyramid schemes. I would submit, therefore, that there is something more going on: a special affinity of the national character and aspiration: it is not only that the pyramid schemes or the crypto fads hold out an underlying promise of wealth, it's that it is available to you without any special merit or personal distinction.
Here lies the key, I would submit, to an apparent paradox in our national culture and ethos. Why is it that so many people in this country worship wealth and celebrity, while at the same time believing that they are somehow sticking it to the "elites" while doing so? How does the right wing of our political spectrum reconcile promoting egregious extremes of wealth inequality with a demotic cultural populism? Why do so many of our right-wing culture warriors and alt-right bros combine a sort of prolonged oppositional defiance disorder toward any mainstream authority figure with a longing for total and abject submission to the personal autocracy of a Trump?
It is because the "populist" tyrant may be rich—unlike you—but in his personal tastes, behavior, preferences—he is exactly like you: an average schlub. A vulgarian. Totally undistinguished by talent or personal merit. The parable of the bro in the YouTube video discloses it all: the pitch works precisely because he is just another average guy with a hundred dollars in his pocket who wants to get rich. And don't we all have at least a hundred dollars in our pocket, or the ability to get it? We could be just like him. So too with all the rich (or quasi-rich) guys who become darlings of right-wing bros: Trump, John McAfee, even Musk: each cultivates a persona online not of exceptional qualities, but of all-too-human vulgarity, rudeness, childishness, and unimpressive intellect.
The idea is: if someone like that can get rich, when they think and act and talk just like me, then I could do it too. It's a caricature and a distortion of all that is best in the national myth, but a logical outgrowth of it nonetheless: a twenty-first century version of Horatio Alger or the log cabin archetype. Nor is this dark side of the national myth merely our own modern creation. As Nathaniel Hawthorne pointed out relatively early in our national history, the two sides of the myth have always been there, each implied in the other. On the positive side, there is the ideal of social mobility and the lack of a fixed hierarchy. Anyone could get to the top, with a bit of luck. But by the same token: anyone could fall back again, just as easily.
This is the tragic side of the parable of the bro in the YouTube video. The promise it holds out, as we have seen, is that even a vulgarian can get rich. But this entails the downside: if the vulgarian loses their money, then they have lost twice over. They are still a vulgarian. But now they aren't even a rich vulgarian. They are vulgar and poor. As Hawthorne put it, in the House of the Seven Gables:
In this republican country, amid the fluctuating waves of our social life, somebody is always at the drowning-point. The tragedy is enacted with as continual a repetition as that of a popular drama on a holiday, and, nevertheless, is felt as deeply, perhaps, as when an hereditary noble sinks below his order. More deeply; since, with us, rank is the grosser substance of wealth and a splendid establishment, and has no spiritual existence after the death of these, but dies hopelessly along with them.
Someone like Trump has attained the facade of success through "wealth" (though always much less of it than he claims) and more than one "splendid establishment" (think gold staircases, his own name grotesquely emblazoned in tall letters over unoffending city streets, and Mar-a-Lago). And he has always equally maintained a personal style that is unrelievedly vulgar and low-brow. He isn't smart; he isn't talented; he isn't interesting. Take away the money and staircases, therefore, and he is nothing. And how terrifying to have one's only worth dependent upon something wholly external! How utterly eclipsing of the self! It sets up a situation that is sustainable only so long as the market keeps afloat, but that collapses without it.
We see Hawthorne's tragedy playing out daily now in the crypto markets. Because, after all, they never promised anything other than money for the average joe. The whole idea was: you don't have to be especially smart or talented. This is a way to get rich that works for anyone, so long as they get in early enough. This, as we have seen, is how our culture achieves the improbable synthesis of populism with extreme wealth inequality: it promises a get-rich-quick scheme that is simultaneously a redistribution of wealth. (Another example: A recent episode of the podcast Fever Dreams described an old financial scam in the 1980s that primarily targeted evangelical churches: the con artist would pose as someone who used to work for the alleged secret banking system frequented only by the rich and powerful. But now, he would say, he was turning his back on them in order to share these same secrets with "the little guy.")
But if the whole promise was that you get rich through luck alone, and through no personal merit, then when the luck turns, and the money goes, then you are left with no personal merit—no continued "spiritual existence" of one's former high status, as Hawthorne put it—on the other side of the crash either. The result is that many Americans feel our sense of self is tied up in the fluctuations of the market, and is annihilated with them if they turn south. It accounts for the suicide hotline numbers posted to the top of crypto message boards and other tragic markers of the despair that follows every downturn or bubble burst. If our personal merit and value is quantifiable by such a concrete metric as our net assets, then it means—in principle—there is no fixed or hereditary bar to anyone achieving high status. But it also means that we are reduced to nothing—doubly nothing—if that metric tracks to zero.
We could well ask, however, whether there are any societies that escape this dynamic. If the above dynamics are the good and bad qualities of our national myth, then presumably—Hawthorne implies—there are other societies that have the inverse problem: a stultifyingly rigid caste system, but one that allows for a continuity of a sense of personal identity that does not depend so heavily on outward material circumstances that are bound to change and flux over the course of a lifespan. William James, writing in his Varieties of Religious Experience, suggests the existence of such societies as well, and describes this quality as the best aspect—perhaps the only redeeming trait—of the aristocratic ideal:
The opposition between the men who have and the men who are is immemorial. Though the gentleman, in the old-fashioned sense of the man who is well born, has usually in point of fact been predaceous and reveled in lands and goods, yet he has never identified his essence with these possessions, but rather with the personal superiorities, the courage, generosity, and pride supposed to be his birthright.
Jean Cocteau, in his Les Enfants Terribles, gestures at something similar when he asserts (in Lehmann's translation): "Wealth is an inborn quality of mind, like poverty. The pauper who has made his pile may flaunt his spoils but cannot wear them plausibly." By contrast, he asserts, his main characters—though born poor in worldly terms—are actually aristocrats of the spirit. They "had been born so rich that nothing in the way of worldly riches could possibly change their lives." America, it would seem, is a land that worships paupers with piles (the Trumps, the crypto millionaires). Hawthorne, James, and Cocteau—all in their different ways—seem to hold out the promise of the opposite of this: a European or other Old World society that admires spiritual aristocrats, irrespective of their worldly wealth.
William James's caveat in the second sentence of the passage quoted above, however (where he speaks of "lands and goods," and the various depredations of really-existing historical aristocracies), already introduces our chief doubt as to the reality of the aristocratic myth. Has there—in point of fact—ever been a hereditary aristocracy that actually operated according to these ideals? Has there ever been one whose prestige and social position didn't actually depend—upon further analysis—on their worldly wealth? Is there any such thing on the face of this earth as an upper class that is ultimately defined as being something other than rich? And if they are in fact able to affect indifference to worldly goods, is this not merely because they have such items in such abundance that they don't need to spend as much time thinking about them as the rest of us do?
Samuel Butler thought not. With his usual mordant view of things, he declared—in The Way of All Flesh—that money is at last the only thing that talks, even in a society such as Great Britain, which Hawthorne probably had in mind as representing the polar opposite of the American ideal—the supreme example of the "spiritualized" aristocracy. Butler addressed himself, in chapter 66 of his greatest work, to the question of whether it is better to lose reputation or money, and he settled for the former, saying: "if a man keeps health and money unimpaired, it will be generally found that his loss of reputation is due to breaches of parvenu conventions only, and not to violations of those older, better established canons whose authority is unquestionable." The implication here is that—even in aristocratic society—the "older, better established canons" of merit really just boil down to the same metric we saw in the United States: personal worth is measured by money.
A similar theme emerges from Hardy's Tess of the D'Urbervilles. Here, Tess belongs to an impoverished country family that discovers itself to be the direct heirs of a once-knighted family of great prestige since the time of William the Conqueror. This fact of genealogy provides her with historical interest and an argument in her favor for her middle-class suitor to use when trying to justify his choice of betrothed to his parents. But it does not prevent her family's further ruination, nor save them financially from the plight that forces Tess to leave home and sets in motion the novel's tragic sequence of events. As Hardy succinctly observes: "So much for Norman blood unaided by Victorian lucre."
So maybe hereditary caste societies don't have much to recommend them after all in this regard: in which case, good riddance to them. They were already unfair prima facie, because they include or exclude people based solely on traits ascribed at birth—things beyond their individual control. The only point in favor of them was that they seemed to offer some "spiritual" continuity to a social identity or position that outlasted a financial loss. And if it turns out they don't really offer even that—at least not for long—then we should be grateful to live in a land that has jettisoned them. Here, we may also measure personal value in terms of net worth, but at least we are honest about it. And we acknowledge that worth thereby attained is a matter of mere luck and external circumstance, not some sort of innate, intrinsic superiority.
And this, according to the young Thomas Sutpen in Faulkner's Absalom, Absalom!, is one of the few things that can make wealth inequalities tolerable. Anyone can see and accept a difference in luck or fortune. What is insufferable is when someone exploits this difference in luck to attribute to themselves an intrinsic personal superiority. Faulkner's character describes how he would admire and experience vicarious joy in another man possessing a "fine rifle," for example—but only so long as the other did not "tak[e] such crass advantage of the luck which gave the rifle to him rather than to another as to say to other men: Because I own this rifle, my arms and legs and blood and bones are superior to yours[.]"
So, perhaps, the American vulgarian-to-riches myth makes the terrible inequality of our society more psychologically bearable. We see people who are much richer than ourselves, but we know that they are not any better than us, intrinsically. They just happened to win the jackpot, lottery-style. They bought the right ticket or cryptocurrency at the right time, and won big. And if they could do it, so could we.
But are we just left, then, with no way out of the tragic downside that Hawthorne describes? Is every society really just ascribing value to individuals based on money, and cutting their personal worth down to zero as soon as they go broke? Are we to have no spiritual essence to cleave to if our outward fortunes turn south (as they are going to, as they already are, whether we have money invested in crypto or not—as the bursting of the crypto bubble just heralds as a particularly emblematic first instance—because inflation is still very high, interest rates are going to rise, and the economy as a whole is going to shrink)?
We could, of course, try ascribing value to people based on something that is neither their money nor their inherited privileges. A thousand moralists and idealists have been telling us to do nothing other for the last many eons. Maybe we should take them up on the idea.
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