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Comment by Animats | Hacker News Reader

arms race between verification and obfuscation will go on for a long time.

It's worse at the top. Theranos. Madoff. MMM. Better Place. The entire binary option industry. Scams are getting bigger. Billion dollar scams were rare in history until recently.

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https://en.wikipedia.org/wiki/Alves_dos_Reis : man prints almost 1% of the GDP in Portugal in "real" forged notes through an elaborate scheme, and nearly manages to buy the bank of Portugal.

https://en.wikipedia.org/wiki/Pyramid_schemes_in_Albania : entire economy of Albania consumed by pyramid schemes, resulting in civil war.

(There's a lot more of this stuff in "Extraordinary Popular Delusions and the Madness of Crowds", from earlier in history)

Alves dos Reis is a great story. He managed to forge the central bank request to print notes, the notes were literally from the same printing presses so they weren't even fakes, as you mention.

I recently got hold of the book ("the man who stole portugal") and it's full of tremendous little details, like the notes being delivered by the printers in travelling trunks to the left luggage office of Victoria station. The whole thing relied on William Waterlow being spectacularly naive combined with Reis' skills in forging credentials and letters of introduction.

I think Albania is a bit of a special case though.

The crisis happened pretty soon after the fall of Communism. The country had not built up any the government institutions required to govern the new proto-democracy. As a result the government didn't merely fail to reign in the scams -- they actually encouraged them (presumably some government officials profited, which is why the people revolted).

The result in Albania should be seen in the context of other major post-revolutionary histories. It was worse than the transition in, say, Poland but much better than, say, the French Revolution.

The fact that the crisis happened to take the form of Ponzi schemes is just one example of the weirdness of history.

He said they were rare, not unheard of. There have been several in the last 5yrs while your quoted links have 50yrs between them. Surely that is considered a significant speed up?

>Theranos

That one still gets me as they solved none of the problems they claimed to have solved as far as blood testing goes, and there was zero legitimate indication they had....

Long story short, Elizabeth surrounded herself with politically powerful, but medically unqualified people like Kissinger and Gen. Mattis. The book Bad Blood does a very good job explaining the depths of the deception.

I think you make it too short. Isn't it interesting that people "like Kissinger and Gen. Mattis", hard and experienced men, allowed themselves to deceived by basically a pair of crooks?

From what I've understand, upper management at Walgreens was very skeptical of Theranos but the CEO was very enamored with Elizabeth Holmes and wouldn't listen to anything negative his staff was telling him.

The other blood testing machine companies also knew that there was no way they solved all the problems Theranos claimed to solve all at once.

I suspect many of them may have known it was a scam but expected it to last long enough to IPO cashout. No proof but it is a possibility. That or they had their arrogance exploited.

There are a lot of both old and recent reasons to believe both of these examples have extremely terrible judgment.

Some situations are easier to rationalize when you are an outsider. I think many people were sceptical of Theranos. Maybe Elizabeth Holmes was charismatic enough to overcome scepsis in most people. It is baffling that she managed to become a billionaire with this tactic. I'm wondering, however, what her long-term plan was (she probably didn't have one, since everything seemed to work out well).

Besides, I found this piece on Wikipedia funny: > In 2015, Forbes named Holmes as the youngest and wealthiest self-made female billionaire in America due to a $9 billion valuation of Theranos.[5] By the next year, following revelations of potential fraud, Forbes revised her net worth to zero dollars,[6] and Fortune named Holmes one of the "World's Most Disappointing Leaders".

Oops, we were off by 9 billion dollars, how disappointing.

Sure, from the outside, with hindsight etc. But people like Henry Kissinger and James Mattis occupy power roles that demand difficult and correct decisions from the inside and without benefit of hindsight. That a pair of crooks went through this discipline and experience like a hot knife through butter tells us something about the nature of power an deception.

Fair enough, I think a lot of that had to do with how these powerful men learned what the "truth" is - since they were not qualified to understand the details of the technology from a scientists/engineers perspective, they relied on expert opinions, and many of those "experts" were also enamored with her charisma and youth, and so everyone gave her a thumbs up because everyone else had given her a thumbs up.

And to give credit where credit is due, she masterfully cultivated these relationships and used that mutual reputation network she built to create her own "truth" with her lies. Had she stuck to politics she may have been President. Hell, had she gone into software, her "fake it till you make it" strategy might have worked (not saying I'd want to work for her). Her downfall was simply that she applied this loose relationship with the truth to medical devices, which have a much higher bar for objective truth than other technologies.

> Billion dollar scams were rare in history until recently.

To be fair, a billion dollars was rare in history until recently.

This.

Big scams weren't rare though. Only no one studies history, but this is not new either.

It's a function of population growth. A sucker isn't born every minute anymore, it's more like four every second.

It's a function of the propagation of technology. Everything is automated, and all code is not equal. If you're to figure out some way to steal money electronically from your bank, and there is no defensive code in place, how will anyone ever notice? The automacy of code can allow these schemes to fly under the radar in a way that physical robbery can not.

You have to normalize to something like the GDP or GDP per capita or similar, with inflation numbers from the past cannot be compared to numbers in the present.

Binary Options aren't fake, they just sell an awful gambling product to dumb people.

MMM what? 3M, or Mr Money Mustache's blog?

What about Better Place? There wasn't just a startup that tried and failed and paid its insiders too much money?

Madoff is an interesting case, because some of his customers were traditional conservative institutions, not just fools looking for a get rich quick scheme (who deserve what they get), but apparently avoided any auditing for many years?

Binary options are "fake" in that they're often promoted by boiler-room operations in a fraudulent manner-- it's not like they're something that's actively traded on the market. If anything, it's more common to use a "collar" strategy in order to get a similar sort of exposure, but benefit from liquidity of the ordinary options markets.

MMM is a ponzi scheme from Russia in the 90s:

https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company)

> In October 1994 Mavrodi managed to win a by-election to replace Andrey Aizderdzis in the State Duma, and with it immunity from prosecution.[17] Mavrodi claimed to be the victim of jealous bureaucrats, and that MMM shares would regain their value if he was elected.[18] During the campaign he was supported by Vladimir Zhirinovsky, who hoped that Mavrodi would provide him with future financial backing.[19] After being elected he appeared in the State Duma only once, to vote against an attempt to strip him of parliamentary immunity.[20]

This is after the bubble collapsed.

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