Fraud has Become the Default Business Model in Western Countries
As mentioned in a couple of previous posts (link 1, link 2), every hyped technological “breakthrough”, in areas ranging from medicine and biotech to consumer technology during past 20-25 years, has turned out to be severe disappointments. Ever wondered why? Well.. this post will discuss one of the main causes- namely, that fraud is now the default model of all new business (especially in past 10-15 years) in western countries. To show how widespread it has trend has become, I will use three classes of examples from totally unrelated areas.
Example Class 1: A few days ago, I came across another predictable expose of how a widely promoted young CEO of a suspiciously well-funded startup has a documented history of shady and illegal behavior. Here is the link to original Twitter thread.
The highly shortened version of this story is that the guy fronting this dubious startup, devoted to producing vegetarian egg substitutes, has run afoul of regulatory agencies from almost the very beginning of his entrepreneurial career. He was also involved in borderline illegal business and accounting practices to show fake growth and revenue numbers to his investors. But like almost every single scammer in Silicon Valley (which is most of them) he will never be seriously prosecuted and will almost certainly end up a ‘respectable’ multi-millionaire. And he is the rule, not an exception. So far, the only Silicon Valley entrepreneurs who actually ended up in legal trouble have been those who preferentially scammed the very rich and politically connected, such Elizabeth Holmes of Theranos and Sam Bankman-Fried of FTX.
This business model which promises to produce something which sounds good on paper, but nobody really wants, is however not unique. A similar attempt to market meat substitutes has also been highly unprofitable and is rapidly failing to the point where its cheerleaders in mainstream media have been forced to acknowledge the problem. Here is one such link and others making this point have been published in past few months. Note that these acknowledgements occurred after billions of dollars were spent on ideas which any sane person could see as dumb. Also, the rejection of these products by consumers was obvious within the first few months, but they kept pouring many more billions in this failed cause because nobody in these companies or the idiots funding them wanted to admit the screwup. Juicero- a startup which sold an “smart” appliance costing a few hundred dollars to replicate the experience of fresh squeezed fruit juice received hundreds of millions and lasted for almost five years.
Example Class 2: Over the past couple of years, I have come across many interesting YouTube channels, and one of them is by a professor at UCSF who is an oncologist with a strong interest in clinical trials. Here is the link to his channel.
While some of his content is about COVID, specifically all the dumb public health ideas instituted without any good evidence of proper randomized trials, his main interest lies in oncology trials. Most videos on his channel are about how clinical trials for new anti-cancer drugs are almost always poorly designed by intent, contain data fraud and misrepresentation and are made to satisfy metrics which has no link to the most important one- namely, any effect on overall survival. As I might have mentioned in the past, majority of very expensive anti-cancer drugs approved in past two decades have no significant effect on overall survival and most are not gentler than older drugs. This is not to deny that therapeutic options for some cancers have improved in that time span. For certain cancers such as CML, Melanoma etc, some newer drugs have made a huge difference. In others, such as Multiple Myeloma, Hodgkin’s lymphoma etc, treatment has become somewhat better.
However for most common types of cancer, these newer drugs have had no measurable effect on overall survival. At best, they might be slightly less toxic than older drugs in some cases. But that is not the real scam. For that we have to take a look at ungodly amounts of money which pharma companies are making by and selling drugs which have no effect on overall survival. And it is not just anti-cancer drugs, as many of the newer immuno-suppressive drugs marketed for thousands of dollars per month have little advantages over combinations of older drugs. To be clear, I am not saying they are completely useless, but their advantage over existing immunosuppressive drugs is marginal- at best. Of course, the companies developing and selling these “drugs” are very aware of their non-superiority over existing drugs and hence use rigged clinical trials or regulatory capture at the FDA to push them. Unlike previous eras, where most companies merely exaggerated the superiority of their new drugs over existing ones- they are now making up such data and are rewarded with billions.
Example Class 3: And it keeps getting worse. A few months ago, I came across an interesting blog about the newest scams in MLM. One post, in particular, caught my eye and here is the link.
While the original is rather long, it contains some very interesting insights into the whole game of manufacturing publicity. To make it short, he talks about the whole apparatus to buy fame (from ghostwriters, fake biographies, paid endorsements, paid interviews etc. There is a whole ecosystem of businesses to generate fake publicity for the purpose of making any two-bit conman appear like a sagacious guru with deep insights on the world. What makes it relevant is that these exact same techniques are also used by so-called “respectable” corporations to peddle their crap. In that way, scammers learned from so-called “legitimate” corporations rather than the other way around. There are, of course, many instances of things going in the other direction. Consider the pernicious effect of private equity on many retail businesses in America. Here is a YouTube clip showing how they infiltrate, gain control of and ultimately destroy other businesses. The very fact that we treat private equity outfits as anything other than dangerous criminals and arsonists tells you a lot about who the current status quo is really meant to benefit.
Which brings me to the overarching theme connecting these otherwise unrelated anecdotes. It is as follows: While scams which create negative value for society have been an unavoidable part of any socio-economic activity, for vast majority of human history, they were always in the minority. Most businesses, even with their somewhat scammy parts, did provide an overall positive return to society. But a majority of the new business activity in western countries (not just USA) over past 10-15 years has a net negative effect on society. In other words, they are about providing inferior or non-existent products and services at greatly elevated costs. It goes without saying that this pattern will not end well for societies that allow it to continue- but that process could take a decade or two to translate into a real crisis. Curiously, this negative trend has had much lower traction outside the Anglosphere countries and some parts of western Europe- suggesting there is a cultural component to all of this.
What do you think? Comments?