Benjamen Walker's Theory of Everything - S-Coin (False Alarm! part iii)

Episode Date: May 1, 2018

Our investigation of the real and the fake continues as your host hunts for a way to monetize it! We ask Alex Goldmark from Planet Money and Bitchcoin artist Sarah Meyohas for advice and author David Golumbia explains how bitcoin really works. Lyn Jeffrey takes us to China to learn about the multi level marketing craze of the mid 1990s and Jed Rothstein tells us about his new movie The China Hustle. Journalist Zeke Faux explains why scammers love Facebook and Toe’s Andrew Callaway visits Supreme to learn how to get rich off Streetwear. PLUS… the ToE coin!  

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Episodes every other week at neverpo.st and wherever you find pods. This installment is called S-Coin. Hawaii vacation with me. It was really a great way to start this series. Oh, no problem. It was, it was actually fun for us to like solidify the memory. Now we've got a really good family lore on tape for us. I was kind of hoping I could, I could ask you something else, um, for the show too, um, about the work that you, that you're doing on the planet money podcast. Thank you for asking. I couldn couldn't help but notice the you know very generous shout out you gave to jody and you had phoebe and lauren on so you want to hear how

we are navigating this like crazy world of should we believe it or should we not believe it at planet money we've come up with like yeah well to be to um for to be honest what I wanted to ask you about was if you guys have thought about, you know, making your own crypto. Oh, you mean like cryptocurrency? Yeah. I mean, like with all the stories you guys are doing on Bitcoin, have you thought about just like making one of your own, like the Planet Money coin? Funny you should ask. we have um when there started to be all of these new coins coming out and all these icos these initial coin offerings a bunch of listeners wrote in and they were like hey planet money you guys should make your own coin you've made a t-shirt you drove for oil you launched your own satellite space like that is what we do as a way to explain

economic stuff and so it seemed really natural for us to do it. And then, you know, it became my job to go and talk with the lawyers and try and figure out like what it would actually take to launch it. Like, technically, how do we make the coin? How do we give it to people? How do we make it not hackable? And at the end, we just said it was kind of too much. And so we just decided, no, we're not going to do it. Yeah, but you launched a satellite.

That's complicated. I don't understand. Why no coin? Because there's basically no way, when we looked into it, there's no way that we could take money from listeners, give them a planet money coin that we just made up that wouldn't have all of the attributes of a scam. It was pretty much guaranteed that some of them were just going to lose their money.

And at least some of them were going to pour money into it thinking it was actually a good investment and they were just going to lose a lot of money. And we just didn't want to be involved in this. When my friend Alex Goldmark discovered how dedicated I am to not just doing this mini-series on the real and the fake, but monetizing my fake as well with a theory of everything coin, he refused to share with me the research he did into how a podcast could put out its own coin. So I sent TOE's Andrew Calloway to the line in front of the Supreme store in Soho

to gather some intel. Because streetwear and Bitcoin work the same way. Well, these are mids, so these are $100. All right, cool. On my first trip to Supreme, I met a guy in line hoping to snag one of the last pairs of the limited edition White Widow Strain 420 themed dunks.

At Supreme, they're going for $100. But as soon as he gets out of the store, he can resell them online for more than double the price. So before I woke up this morning, I checked the stock. People are reselling them for $260 already. Get out. And they just came out a few days ago. $420. I might just have to invest in those. I'm working them for $2.60 already. Get out. And they just came out a few days ago. $4.20. I might just have to invest in those.

I'm working on a podcast. I was wondering if I could ask you a question. A couple questions. Sure. Cool. We're doing an episode about crypto. You can't be here, man. I can't?

But as soon as I tried to move the conversation to Bitcoin, the security jumped on me. Take that thing out of my face, please. It turns out Supreme has a strict no recording in line policy. So I came back the next day with my hidden microphone. But this time, nobody wanted to talk about Bitcoin. When I got to the end of the line, I didn't know what to do. So I just bought some shoes. Did I read the other day that you guys are taking Bitcoin and stuff now?

It's a US dollar. I tried one last time. I borrowed some styling clothes from my more fashion-forward roommates, and I found somebody who could talk to me about Bitcoin. But he told me that it is so last season. Before, like a couple months ago or a year, it was like really hot. Yeah, now it's got shit going,

because it's like, it's whack now. It's like not good, it's not hot right now. At Supreme, I learned that the real way to make money is street wear. Forget about pump and dump scams. Today, it's all about the pump and dunks. You could become a multi-millionaire off just reselling some cream. Bitcoin is supposed to be a technology, right? And technologies are supposed to be useful because they work and actually do things, right? And what's really amazing about the Bitcoin and blockchain thing is that it doesn't actually work. Unlike most other technologies, it kind of divorces itself from the thing that defines technology, which is working. David Golombi is a professor of digital studies at Virginia Commonwealth University,

and he's the guy you need to talk to if you want to understand how Bitcoin actually works, like as a currency. Something that doubles in price in a month is really, really bad as a currency. Thanks to David, I now understand that alternative money has as much value as alternative facts.

And thanks to David, I no longer feel bad about tuning out the Bitcoin people when they try to tell me about their magic internet money. So when the Bitcoin people come out and say Bitcoin is the money of the internet, they're sort of suggesting that, you know, the internet is a kind of institution or place that could issue its own money and maybe even collect its own taxes. But that is also contrary to reality, right? This is when you discover that they are not really interested in sort of empirical facts or ordinary logical argumentation. I mean, it's amazing. You know, even today, you can go into your Bitcoin forums and Twitter and so forth and have people say, you know, fiat money issued by the United States will steal your value

through inflation, you know. And then you say, what about the fact that Bitcoin has lost 60% in the last three months, which is hyperinflation of a sort that is only, you know, we've only seen in Zimbabwe and pre-World War II Germany. And they'll say, oh, that's not inflation. You know, you're a statist who loves central banking or something. For David Golombia, the key to making sense of Bitcoin is realizing it's a cult. The cult of Bitcoin. That's the title of a piece he wrote for a recent issue of The Baffler. What we see in Bitcoin is a bunch of, I don't even know if you can call them beliefs, but

they're slogans that the Bitcoin people recite over and over again. And they're resistant to any kind of examination, you know, in the real world. You know, one of the people who's written about cults talks about bounded rationality or bounded choice, that the cult prevents you from making choices about things that are outside of its worldview. And that is very much like cult meetings in which everybody thinks the same way and everybody says the same thing and there's not much room to dissent in any way. But isn't there one thing we need to deal with in order for this cult analogy to work? Bitcoin was founded by a fictional person, Satoshi Nakamoto,

and cults have real leaders. How does a fictional person lead the cult of Bitcoin? You know, he issued some edicts, and you can even buy a book that collects sort of the collected sayings of Satoshi Nakamoto. But he doesn't tell you how to live your life. He doesn't tell you who to have a relationship with. He doesn't tell you any of those things. He just tells you, as the people like to say, hold, spelled H-O-D-L, right? I think that if you imagine the Bitcoin experiment with an identified person behind the Satoshi, or just using their real name, it really would have less power. Now, Satoshi Nakamoto might be a fiction,

but he has a right-wing pedigree that is very real. Bitcoin doesn't just attract right-wing thinking, right? It itself is an example of this kind of right-wing thinking. And you see this very clearly in the original paper by Satoshi Nakamoto and even more so in the earlier documents by the cypherpunks and cryptoanarchists, it really does rely on a kind of right-wing understanding of the world and a really unpleasant understanding of the world, right? Where social relations between people can be abandoned in favor of these machine relations.

You don't need to trust other people, which means you don't trust other people. You only trust the machine code. To understand just how much power Bitcoin draws from right-wing ideology, just poke around into the history of one of its core values, decentralization. Decentralization is a concept that one of the founders of the sort of current right-wing politics that haunt us everywhere, Friedrich Hayek, like to talk about a lot. And decentralization in Hayek's thinking just means absence of government, right? Government is the centralizer and decentralization means you've gotten rid of it. There's no actual examination of sort of what centralization means and is government actually centralized and are businesses – you just get rid of all that. And people may encounter this through simply hearing about Bitcoin and blockchain.

And then they slowly hear about decentralization and then they become sort of converts to this church of decentralization without ever thinking about what does that actually mean politically? Where do those ideas actually come from? Who supports those ideas and who doesn't support them? And in that way, it's very good at getting people to absorb certain political assumptions that to most of us are false, right? And those include things like the idea that government regulation is actually an evil scheme by certain powerful people to steal what belongs to the rest of us. You don't have to look too hard to find people on Bitcoin forums complaining about Jewish central bankers. But the demand for decentralization isn't just a dog whistle for anti-Semites. It's also the battle cry of the scammer.

Bitcoin and blockchain are very good at selling this view that decentralization is wonderful and therefore whatever the opposite is of decentralization must be bad. But in the stock market, the SEC that prevents you from doing pump and dump schemes could be considered some kind of centralizer, right? But that's, I don't know anybody who thinks, except Bitcoin people who thinks that that's bad, right? They're doing a good thing by preventing people from manipulating the stock market. But if you go on Reddit and search pump and dump Bitcoin, and also the smaller cryptocurrencies, especially, you will find

just hordes of people, you know, we're going to go at four o'clock and we're going to buy a whole ton of Litecoin. And then we're going to tell everybody that it's going up and up in price over on this form. And then we're going to sell into that and make money and they do it. There's a reason that these people hate regulated free markets so much. And the reason is that the regulated free market interferes with scams, right? It makes it much harder to rip people off. That's what regulation is all about at bottom or most regulation, right? Is stopping capitalists from ripping other people off. Lloyd Blankfein, Goldman Sachs CEO, recently said, if Bitcoin works, we'll get to it. Thanks to David Golombia, I now understand what he really means. The cult of Bitcoin just needs a little more fattening up before the wolves of Wall Street rush in.

You haven't missed out, but you need to invest now. Bitcoinira.com is the world's first and leading company that allows you to put Bitcoins in your retirement account. Bitcoin is a global phenomenon, but some countries are better than others at the crypto game. Last month in China, a company called DBTC fleeced global investors out of $13 million in less than two weeks after its ICO. DBTC was able to do this because it supercharged its crypto scheme using MLM, multi-level marketing. So most people, when they think of multi-level marketing, you could think of a company like Amway or a company like Avon. But it's a whole kind of way of buying and selling things where you don't sell through a store, but you sell through individuals and you create these kind of networks of individuals who sell things to each other.

You could almost think of it as peer-to-peer marketing, except in the case of multi-level marketing, it's not really peer-to-peer, it's arranged in these levels and it's kind of hierarchical. And all of the profit goes to people above you in the network. That's Lynn Jeffrey. Today, she's a researcher at Stanford's Institute for the Future. In the mid-90s, she was living in Beijing, researching MLM in China for her PhD in cultural anthropology. I decided to choose this as a topic because I was trying to understand what it meant to get rich. That was one of the things I was interested in. And the other reason I was drawn to it was because if you were living in a city, and even in many villages in the mid-90s

in China, you would have heard people talking about this on the bus, on the street. I mean, you couldn't avoid it. Everyone was talking about Chuanxiao, on the street. I mean, you couldn't avoid it. Everyone was talking about Chuanxiao, you know, this kind of like fever that was sweeping the country. As a researcher, this turned out to be a really great topic to explore because it's all a network. And everybody in the network wants to meet everybody else in the network because you're always trying to grow your network.

And you're always trying to find people who can help you do that. And since I was a white woman, American, who could speak Chinese, I think a lot of people wanted to have me in their network so that they could use me for various things, mostly to try to sell things. The kinds of things that people sell in multi-level markets is still the same today. They tend to sell the kinds of products which are really hard to put a value on. So like, you know, fish oil and calcium to like like, bras that will massage your breasts. I mean, just all kinds of crazy things. Any kind of health-related product where you can make all kinds of claims about it. It's going to cure everything from cancer to, you know, Alzheimer's. And you can't really put a price on it.

In order to sell all this stuff, you need to get people to believe in the products and multi-level marketing. But no one will do this if you don't believe in yourself. This is what multi-level marketing is really all about. Individuals on the upper levels hosting workshops for people on the lower levels who pay money, lots of money, to learn how to believe. Lynn Jeffrey attended and documented tons of these workshops. She shared some of her audio with me. These were sort of, you know, multi-day trainings

that were crafted on techniques that came out of the evangelical community in the US, out of human potential movement from like the 70s in the US. Very well tested multi-level marketing techniques that are still used today. And then you have sort of ideas about Chinese martial arts trainings and this weird discipline and so all of these things mixed up together. But the heart of multi-level marketing was going to these trainings and learning yourself how to believe that you could become a marketer, that this was a good thing to do, that it would be making an important contribution to society and to your family.

The role of belief and the importance of belief, I think, at that moment in China was so important. This is something from my field notes from another one of the trainings, and this was an executive who went by the name Executive Shang. That was his last name. So he says, and he's, you know, standing on the stage, and there's hundreds of people in the audience and hanging on his every word. And he says, we all know these are fictions, but if you can't even feel the fake, how are you ever going to dare to face the real? And then he starts

yelling, how will you face the real? A general starts out as a soldier and he goes through training. Is that training real or fake? Fake, someone yelled out, while somebody else cried, real. Obviously there was some confusion about this point. Mama! Mama! The thing is, when people attend these kinds of trainings, they're looking for something. They want to be successful.

They want this to be a method that's going to work for them. They want to learn how to sell things and, you know, make a lot of money and be super healthy and contribute to their family and all these things. So they're going to the trainings because they hope that the trainings are going to give them what the trainings say that they're going to do, which is you're going to leave this training, you're going to discover your own potential, which has been suppressed by, you know, years and decades of socialist education. And you're going to kind of dig out your sense of yourself as an individual who would be able to sell things. And so the whole thing really at its heart was about making yourself believe. Over the course of her research, Lynn Jeffrey meets some amazing individuals. My favorite is director Su. He flies her out

to a little village and dictates a speech he wants her to read. I'm honored to receive Su Mei Ru's invitation to come to Shandong Linyi, that's the name of the city, to be a consultant for our company. I hope for mutual cooperation from now on for the cause of MLM. I hope that during this crucial period, everyone can control themselves and will not take the wrong path. I'm sure that tomorrow the sun will still rise. I can't even say it. It's so great. I'm sure that tomorrow the sun will still rise in the east. Even though Director Sue is able to trick Lynn Jeffrey into providing a white American face for his workshop, he doesn't exactly know what he's doing.

Unsatisfied attendees beat him up and then have him arrested. But when he gets out of jail, he just goes right back to it. I guess that's what was so funny about him, right? He was such a brazen bullshit artist and he was so bad at it at the same time that it was just, you just, it was just irresistible. By 1998, though, the MLM con was beginning to spin dangerously out of control. Multi-level marketing was getting completely out of hand. People would go and set up a new multi-level marketing company in some remote town,

and they would get people to come, and then they would sort of almost hold them hostage there until they got other people to come and join the network. And you would have these villages balloon into communities where there would be tens of thousands of people. People were committing suicide. People were taking each other hostage like they did with Director Su. People were killing each other. And so the government banned all multilevel marketing activities.

They shut it down. For Lynn Jeffrey, this was a relief. I got very emotionally attached and connected to people's desire for something. Their strong desire to find a new self, to find a new path, to find a way to make it. And it was so frustrating to see multi-level marketing systems and practices that just exploited and abused that desire. And so I felt like the government was absolutely doing the right thing to shut it down. But it didn't stay shut down for long. MLMs recently made a big comeback in China.

Once again, people are getting kidnapped, even murdered. And as DBTC proved last month, when ICOs use MLM, they can take their scam to the next level. If you decide to tell others about Digital Gold Share so they can take their scam to the next level. If you decide to tell others about digital gold share so they can get started learning about Bitcoin, you will get paid every month on everyone you introduce in your organization. With one of the industry's most powerful compensation plans, achieving financial freedom is only moments away.

Here's how it works. American investors are always clamoring to get in on the Chinese miracle, but the Chinese government makes it hard for Westerners to participate. But around 2008, just after the financial crisis, a handful of investment banks figured out an angle, a backdoor process called a reverse merger. Here's how these reverse mergers work. A Chinese company looking for a way into American exchanges merges with the shell of a defunct U.S. company

that no longer operates, but still legally exists and has a listing on a U.S. stock exchange. The Chinese company then takes the shell company's place in the market. Presto, you just appear. You're a stock that's trading in the U.S. and you've got a story to tell

and no one asks any questions. That sound from a new film called The China Hustle. It tells the story of a giant pile of money that was invested in these reverse mergers and lost. We're talking a lot of money. Several tens of billions of dollars. Jed Rothstein's the director of the China Hustle. And in his film, he follows a number of investors and short sellers who expose the truth about these Chinese miracle companies, some of which on paper are growing at 50% a year. One of these men is Carson Block.

Carson Block was a young businessman living in China at the time, had a self-storage business. And his father was a stock picker, stock analyst back in the U.S. and was interested, like a lot of guys, in getting involved in what seemed like this great opportunity in China. Heard about this company called Orient Paper and wanted to invest in it and asked Carson and his buddy to go take a look at it. It was a country road. It was in poor shape. That road could not support the massive trucks that would be going in and out of that facility all day. On the balance sheet, they were showing about $5 million in raw materials. And so they had heaps and heaps of this old corrugated cardboard out front.

My friend climbed one of those heaps to take a look at the expansive rotting cardboard. And when he came down, he said, if this is worth $5 million, the world's a much richer place than I knew. Carson Block puts out a report on his findings that spurs people to look into other companies. Orient Paper is not the only fake. He then goes into the short-selling business, betting against these Chinese companies, and using his research as a weapon to make his own giant pile of money. He calls his research firm Muddy Waters.

There's a proverb in Chinese, muddy waters makes it easy to catch fish. That saying, muddy waters makes it easy to catch fish, explains so much about what goes on in China. Opacity creates opportunities for people to make money. That's China's view. Muddy Waters. I thought that that was a very apropos name for the firm and chose it. But for Jed Rothstein, the story of these reverse mergers isn't just a story about fraud in China.

It's a story about a fraudulent, globalized financial system, hell-bent on monetizing the fake with rules that favor scammers and penalize those who want to believe. We have a global financial system where capital can move around the world at the speed of light, or certainly at the speed of electronic transactions. The regulatory system and the rules of the game are really stuck in many cases in the 20th century. The regulatory system and the rules of the game are really stuck in many cases in the 20th century. And so there's this sort of gray space, this sort of murky space in between where truth is not particularly valued and where it's easy to perform information arbitrage and where you don't have to push too hard because there's

very little penalty if you're caught doing the wrong thing because the regulators can't get to you. The system is so complicated that there's sort of plausible deniability all around and nobody really is accountable or very few people are. And internationally, that's even more true than it was domestically. Although I don't have to remind you, you know, nobody went to jail. Nobody went to jail after 2008. What's that folder? 101 fake images. Yeah, these are all fake petals.

And some show some artifacts. You know, they're not perfect. Artist Sarah Mayohas recently trained an algorithm to generate digital rose petals. It was an ambitious project involving thousands of real roses, temp workers, and a film shoot in the historic Bell Labs in Homdell, New Jersey. I wanted to really be big data. And so I got 10,000 roses, red ones, pink ones, yellow ones, orange ones. And I had 16 temporary workers that I sourced from a temp work agency called Manpower.

And they were all men. And I had them picking and photographing at stations all of the petals. So we got a data set of 100,000 images. Sarah's original plan was to build an algorithm that would generate beautiful rose petals. But to do this, she first had to build a data set of real, beautiful rose petals. I was asking the men to press one petal per rose that they considered most beautiful. But ultimately, the question of choosing one that was beautiful or not beautiful became almost random. And some of the petals look practically identical.

So choosing one over the other has no value. Advances in machine learning make it possible for a non-technical person to train a computer to recognize something, like a rose petal. This is what the algorithms that power Google and Facebook do. Trained on lots and lots of data, they've become really good at recognizing things like faces, babies, and cats. The next step is getting computers to generate faces, babies, and cats on their own. This is what all the big internet companies are focused on.

They're pushing their AI to dream, create, and generate. Sarah Mayohas did the same thing with her pedals. I trended to make new pedals and make them as realistic as possible. These pedals are pretty small. You still need a lot of computing power to do something like this. And while companies like Google are making resources like TensorFlow available for anyone to use, it's also pretty expensive. This is why Sarah partnered with some friends from business school.

When I asked them to help me, I really thought, wow, they're doing me a huge favor. But for them, it was an amazing data set to work with. This is what's so intriguing about Sarah's project. Her digital fakes have artistic value, and the whole project has economic value. Sarah has a head for art and business. She's also got an MFA and a business degree from Wharton. Value is a big topic for her. This is why in 2015, she created Bitchcoin. I had been thinking about value, Bitcoin, gold, digital gold, and I thought, wow, I should create my own cryptocurrency. And then the name Bitchcoin came. It just popped into my head while I was having eggs one day.

I remember it. And then I thought, oh God, I can't not use it. Now I really have to do it. Sarah backed Bitcoin with her art. $100 for 25 square inches of any one of her photographic prints. Photographs are endlessly reproducible. And yet in order for them to have value in the market, we are forced to print them and to fetishize the print and make it an addition of five. Otherwise, no one's going to buy your photograph and no one's going to care about it. And that's kind of the same way with money, right? You print money or you don't print it. And that affects, you know, inflation and how much the money is worth.

The thing I love best about Bitcoin, though, is that Sarah didn't even bother to put it on an exchange. This circulated more as an idea than as a coin. And that's valuable, you know, in itself. Not being on an exchange didn't affect the project at all because my audience was people who like and appreciate my work and want a piece of my work. And random Joe Schmo, who's sitting on his computer, checking Reddit,

doesn't need to have a stake in my artwork. Sarah Mayohas helped me understand that I don't need to create my own coin. I mean, I already have a product of questionable value. This podcast. But of course we met after I blew all my savings on creating my own coin, a premium chocolate gold foil coin. I'm serious. This is for real. I'm calling it the Benjamin. And if you sign up for the Theory of Everything newsletter, I'll tell you all about how you can get one for yourself. It's designed by the cartoonist Jordan Crane, who's been doing the drawings for this False Alarm series.

You are definitely going to want one, dear listener. You can carry it around in your pocket like a challenge coin. And one day when we finally encounter each other in person, in the real world, you can present it to me and I'll take a bite out of it. And your coin will skyrocket in value. So yeah, if you want exclusive access to the first round of our initial coin offering, all you have to do is sign up for the TOE newsletter. The only problem is, well, I kind of made a lot of these coins, like a lot, a lot.

So I'm going to have to figure out a plan to unload them on the masses. I turned to a Wall Street reporter at Bloomberg News, Zeke Fox, for help. You see, he recently took a trip to a conference in Berlin to learn how affiliate marketers are succeeding in selling all kinds of questionable products using Facebook's targeted advertising algorithms. I went to the Affiliate World Conference in Berlin. It is hosted by a message board called Stack That Money.

If you didn't have anyone telling you what to look for, the conference might look pretty innocuous because it's all these companies with generic tech names. But if you look a little bit below the surface, these guys are all promoting all the slimy ads that you see all over the internet, things that you'd recognize like win a free iPhone or even your computer may be infected, adult dating sites, brain pills, diet pills. The booths are all for the guys with the offers. Like we've got these diet pills and we'd like to sell them for $100 a month. But if you sell them, honestly, it's going to be very hard to get anyone to buy them. And if you yourself just go and create a company account on Facebook and buy deceptive advertising, you'll soon be found out.

You need a middleman, some sort of fly-by-night operator, maybe someone who has thousands of accounts. So what you do is you put the word out through an affiliate network. And you say, hey, I've got this new thing. It's called Zentronics 50X. And I'm willing to pay $60 per sign up. And please don't say Oprah endorses it. Wink, wink. The conference was to connect like the pill makers with the marketers and the affiliate marketers who are often just like young guys living in their parents' house, just someone who's looking for a way to get rich quick online. What they do is they go out and place ads on Facebook and other platforms.

They'll come up with their own creative, as they call it. Oprah says, buy these diet pills right now or else. And they're free. Just put in your credit card here for some reason. If the customers complain, the diet pill maker can say, well, I didn't make those ads. I'm really sorry. There's really no accountability. And there's no way for Facebook to really police that.

If Facebook catches someone posting deceptive advertising, it will hold them accountable. But first it has to catch them, in the act. There are lots of ways to avoid this. So when I was at this conference, I started talking to a lot of these affiliates. And they were very quick to share whatever tricks they had, like cloaking. What you do is you try and identify Facebook's ad reviewers by their IP addresses.

I mean, in the most basic one, you could say, all right, if they're in California, don't show them anything bad. Maybe just show them some sort of innocuous quiz. But if they're in any other location, Oprah says buy these diet pills. So that's like the most basic version. People have gotten really sophisticated about this. And brazen. The real Facebook also has a presence at the Stack That Money conference. If you walk through all of these booths for all of these different scams, and you get to the back, there's an auditorium. And on stage for most of the two days were saleswomen from Facebook introducing speakers, moderating panel discussions. And they're not talking about

scamming. But anyone who knows what these companies do would know what was going on. I mean, you had to walk through the booths to get to the back. And it seemed like they were sponsoring the conference. So I'm Maria Claudio. I've been with Facebook. It will be three years now in November. We're going to talk about some really interesting solutions we have at this point that can help you grow and optimize your business. After the conference, the Facebook saleswomen flew on a plane rented by the message board, Stack That Money, with some of these top affiliates to Ibiza for two more days of parties. Zeke Fox wrote all this up for the piece he reported for Bloomberg News.

I put a link to it on the show page. It's a must read. He also hangs out with this guy named Grin, a guy who's made millions using Facebook's targeted advertising. My name is Robert Grin. And when I'm not playing games or trying to build billion-dollar startups, I like to live life to the fullest. Over the course of his investigation, Facebook does put Zeke on the phone with one of their new ad cops, who tells him that Facebook has plans to deal with these scammers.

But he also tells him that Facebook is wary of putting up too many barriers for small independent businesses who might want to advertise things on its platform, like, I don't know, diet pills. They could require a lot more verification of your identity before they allowed you to place advertising. It's just that that would slow down their ridiculous growth. The waters are just too muddy for a journalist or even yours truly to come out and say unequivocally that Facebook is in cahoots or is complicit with these scammers. But if you ask an affiliate

marketer, you'll get a straight answer. Stack That Money guys love Facebook, and they told me Facebook had revolutionized what they do. And the reason is that they used to have to guess what kind of person might be receptive to their really ridiculous ads. But a few years ago, Facebook introduced a new feature called the conversion pixel, which sounds kind of weird. But what it is, is Facebook started being able to track not only who clicked on the ad, but who visited the diet pill page and bought the diet pill. And so now if you want to sell something, you don't need to say, I want to target women ages 40 to 50 who live in Virginia. You can leave it very, very broad and Facebook will just do some trial and error. And after a few days of practice, its algorithm will figure out, hey, these are the kinds

of people that I should be showing this ad to who fall for these stupid diet pill claims. And you'll see your sales start to take off. That was the technical explanation. But one of these guys, to sum it up, said Facebook goes out and finds the morons for him. You have been listening to Benjamin Walker's Theory of Everything. This installment is called S-Coin. Zeke Fox and Alex Goldmark and all the folks Andrew Calloway recorded in the Supreme Store line.

I'd love to hear what you think about the new series. Drop us a line on our new website theoryofeverythingpodcast.com and I'm serious about the coin. Sign up for the newsletter and I'll tell you all about it. Help me turn my stack of Benjamins into a stack of money.

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