04 May Episode 160: The ‘Last $100 in Your Bank Account’ Economy – How Media’s Love Affair with Crypto…
Citations Needed | May 4, 2022 | Transcript
Intro: This is Citations Needed with Nima Shirazi and Adam Johnson.
Nima Shirazi: Welcome to Citations Needed, a podcast on the media, power, PR and the history of bullshit. I am Nima Shirazi.
Adam Johnson: I’m Adam Johnson.
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Adam: So, quick correction, on Episode 157, I was listing off pundits who had blamed “trans bathrooms,” quote-unquote, for the 2016 Trump victory, I correctly listed David Brooks, Mark Lilla, Bill Maher, and then I mentioned Freddie deBoer had done so, I got him confused with another writer. He didn’t actually blame trans bathrooms on Trump’s win, that was a very bad mistake, it has since been taken out of the show in subsequent uploads. So I just wanted to apologize and correct that. That Freddie deBoer did not in fact blame trans bathrooms for Trump’s win. Just wanted to make sure we got that squared away. Now on to today’s episode.
Nima: “NFTs May Seem Like Frivolous Fads. They Should Be the Future of Music,” argues Rolling Stone magazine. “How to Buy Bitcoin and Other Cryptocurrencies: A Guide for New Crypto Investors,” advises Time magazine. “‘I had $10 in my bank account’: This 36-year-old went from living paycheck to paycheck to making over $109,000 selling NFTs,” proclaims CNBC.
Adam: In the past couple of years, US media have been breathlessly hyping a new economy of digital quote-unquote “investment opportunities” and asset speculation. From cryptocurrency to NFTs, sports betting to online streaming casinos, business rags and legacy papers alike extol the virtues of a financial climate in which seemingly anyone with an internet connection, a smartphone, and a few bucks stands a chance of striking it rich.
Nima: It’s what we’re calling on this episode the “last $100 in your bank account” economy. Somewhere, someone thinks there’s too much idle money sitting in working and middle class people’s accounts, if they even have bank accounts, that isn’t being properly exploited. This, to them, is a crime, and increasingly sleazy verticals are emerging to make sure it doesn’t stay tucked away for too long.
Adam: After all: ‘Don’t you want to make your money work for you? Don’t let it sit there and collect dust. Get in on the action, fortune favors the brave, the next frontier, you can hit a 10 way parlay, don’t be an idle beta, get in on the action!’
Nima: Since the onset of the pandemic and the evaporation of government aid like unemployment and child tax credits, new gambling markets have exploded, filling the financial voids suffered by working people. Meanwhile, news outlets and sports networks have been at the ready, using the same old aspirational advertising tactics for lotteries, betting, and casinos that they’re using now for NTFs, crypto, and sports betting. And it’s not just about paid ads, the media companies themselves — from Disney to Fox to Comcast — are in the sportsbook business, and every outlet from Rolling Stone to the Associated Press are hawking NFTs, creating new frontiers of conflicts of interests.
Adam: On today’s episode, we’ll detail the history of media’s water-carrying for lotteries and other forms of gambling; how the press primes the public, especially the poor, to accept new forms of speculation like NFTs and cryptocurrency as normal, inevitable, and full of promise; and the ways in which they are cashing in on this cynical, infinitely regressive universe of extracting the last dollar out of your bank account.
Nima: Later on the show, we’ll be joined by Edward Ongweso, Jr., staff writer at Motherboard and co-host of the This Machine Kills podcast.
Edward Ongweso, Jr.: You have a lot of crypto projects, a lot of NFTs, a lot of digital assets connected to blockchain technology being pushed by a very small network of people onto a very large immiserated, precarious group of people. But also at the same time you have a large mass, precarious and immiserated people looking for ways to make ends meet or to have something more than living paycheck to paycheck, and who are being fed by these orchestrated networks by these PR campaigns, by the self dealing that occurs in a lot of these crypto projects and networks and investors and groups, they’re being fed the idea that this is their golden ticket, and they’re going to miss out if they don’t invest in it.
Adam: So about three and half years ago, we did an episode on gambling, specifically how it’s a manifestation of neoliberal rot and it’s a progressive tax.
Adam: Without necessarily commenting on whether or not it should be legal or illegal, but citing it for what it is, which is a regressive tax that politicians use to paper over decaying economies and inability to tax the rich and the deindustrialization of the Midwest, and the Rust Belt. As I’m required by law to say, this is a spiritual successor to that.
Nima: It’s true.
Adam: If not an actual sequel itself, maybe not even a spiritual sequel, maybe just a sequel, because that was three and a half years ago and much has changed Nima.
Adam: It’s actually somewhat quaint of an episode in retrospect, because we didn’t even talk about NFT, crypto or sports books.
Nima: Yeah, and looking at how that has exploded in the past few years, especially during the pandemic and possibly because of the financial crisis that so many people were thrown into, and the global economic crisis, the explosion of crypto and NFTs, I think, as well as sports betting and now the kind of rampant legalization that you can bet from your phone anytime on anything, like who’s wearing what color jersey, does someone trip over a mascots foot? These are all new forms of regressive tax, but also, basically Ponzi schemes that just need new warm bodies and new bank accounts to invade.
Adam: Yeah, because it’s fundamentally a media story, because for the most part, these new verticals, from the blockchain, to sportsbooks, to NFTs themselves, which we’ll get into later, they’re being pushed by media corporations themselves. So there’s an institutional conflict of interest to not really examine or ask hard questions about whether or not these new forms of speculation brought to the masses that are quote-unquote “democratized” to the masses, whether or not it’s a healthy form of government revenue creation in lieu of taxing the rich. So we’re going to begin by talking about the history of gambling and the media’s role in gambling as an institution and specifically state sanctioned gambling.
Nima: Yeah, so as you would imagine, this dates back hundreds of years. By most accounts, gambling as a US “pastime” dates back to the 17th century, when the 13 original colonies held lotteries as a source of revenue. Lotteries had previously been established in England during the previous century in order to fund the reconstruction of ports and ships for the royal fleet. These raffles were marketed to the upper crust of society, as the ticket costs of 10 shillings each were prohibitively high for most average citizens.
Advertising eventually began to broaden the appeal and target audience of lotteries in the colonies and England alike; notably, lottery ticket sales would eventually be used to fund the Revolutionary War. Starting around the 1720s, according to historian Neal Millikan, colonial and British newspapers alike on both sides of the Atlantic, like the South Carolina Gazette and the Times of London, began to advertise the lotteries, with some calling those who purchased lottery tickets quote-unquote “adventurers.” As Millikan writes in his 2011 book, Lotteries in Colonial America, quote:
Historians researching the consumer revolution have shown that during the eighteenth century, the middling classes in Great Britain and the American colonies had disposable income that they used to purchase goods that went beyond mere necessities. Colonial lotteries became a part of this consumer revolution as colonists had the opportunity to become an ‘adventurer’ and risk a small sum of money in the hopes of winning a valuable prize.
Adam: Around the same time, anti-gambling legislation was circulating throughout the colonies, both on grounds of religious and economic opposition. For example, in 1721, New Hampshire prohibited gambling in order to prevent the impoverishment of the gambler’s family, a concept grounded in English Common Law, and Massachusetts Puritans and Pennsylvania Quakers had passed anti-gambling laws decades prior. Gambling regulations would be in flux for decades to come.
By the 20th century, commercial gambling in the US was starting to be legalized statewide, when Nevada passed the “Wide Open Gambling Bill” in March of 1931, about a year and a half into the Great Depression, setting the stage for the gambling destination we know today.
The bill was passed at a time when Nevada also liberalized divorce law, making it one of the easiest places in the country to get divorced — and get divorced quickly — hence becoming a divorce colony full of quote-unquote “easy spenders.”
Starting in the 1960s, after a long period of lottery prohibition, states began reinstituting their lotteries, amid an increasingly pro-gambling legislative climate. By 1993, 35 states had revived their lotteries and 44 had legalized horse racing. Within this period of time, specifically starting in the 1980s, states began recruiting ad firms to craft PR campaigns using aspirational messaging to attract first-time ticket buyers and lower-income Black and Latino consumers.
Nima: In 1986, the Illinois Lottery placed a billboard in a poor Chicago neighborhood that read, quote, “From Washington Street to Easy Street,” end quote. Similar billboards were placed around the city with just different street names inserted to appeal to different audiences. Some stated that the billboard read, quote, “Your Ticket out of Here,” a claim denied by the Illinois Lottery itself.
The next year, 1987, a Maryland state audit proposed research into, quote, “what game is most effective in luring an individual into playing for the first time,” end quote. The audit recommended more sophisticated analysis and strategies for reaching particular quote-unquote “segments” of the market.
Adam: Here are a couple of New York Lottery commercials that relied on many of the same themes from the 1980s.
Man #1: We are big family here.
Man #2: From all over the world.
Man #3: China.
Man #4: Yugoslavia.
Man #1: Italy.
Man #5: Czechoslovakia.
Man #6: Yonkers.
Man #7: So we all kicked in a dollar for New York’s big lotto jackpot.
Man #8: We hit it!
Man #7: An American dream come true.
Man #1: Now we part of another family.
All: New York lotto family.
Man #9: Okay, you rich guys, back to work!
Man #10: Join the family, play lotto every Wednesday and Saturday.
Nima: Yeah, so that one from 1988, you know, plays on this kind of American Dream, melting pot of immigrants, working class, join not just the American family, Adam, but the lotto family before they’re scolded by their boss. So it’s time to get rich so that then they can be the bosses. Here’s another commercial, also a New York State Lottery commercial. I grew up with all of these, I totally remember these, this one is from 1990, it does a kind of similar thing.
Man #1: I keep my job, but I’d hire somebody to do it for me.
Woman #1: I’d trade the BMT for a BMW.
Man #2: I’d still fight fires, but only on my barbecue.
Woman #2: I’d be a well fed artist instead of a starving one.
Woman #3: I’d buy some used furniture at Sotheby’s.
Man #3: Tonight, someone could win millions of dollars.
Woman #4: I’d finally put my money where my mouth is.
Man #3: New York Lotto. All you need is a dollar and a dream.
Adam: And so the idea was to market to poor people, the evidence of which we will explain more of later and we explained in great detail in Episode 63, that there’s this kind of get-rich-quick, you-can-make-it-in-America, overnight success story. It’s a sort of quintessentially American concept, right? Although of course, there are a lot of other countries, the way it’s marketed specifically both here and other countries, it is marketed as a way for people who are in situations where they can’t imagine ever having enough money, that why not spend $1 here and there and have a chance of being rich, and to make it palatable to America’s particularly Protestant and repressed culture, which opposes gambling on moral reasons, it was sold as a way of funding education, because after all, who opposes funding education. A 1998 Washington Post article reported, quote:
The D.C. Lottery’s 1997 ‘strategic update’ similarly proposed creation of ‘educational vehicles to encourage newer, younger players.’ The document also outlines a proposed ‘targeted marketing effort’ aimed at reaching the ‘rapidly growing Hispanic population’ by increasing the small number of Hispanic lottery agents.
A Maryland Lottery consultant’s 1994 report noted that ‘it will be critical to maintain (the state’s) base’ of heavy Keno players, who were described as ‘lower income, less educated (and the) heaviest minority’ compared with more casual players. ‘Politically,’ the report added, ‘it could be difficult to defend promoting gambling to this segment.’
So as a way of making this sort of unseemly direct marketing to poor people and minorities seem less bad, it increasingly became about public education, specifically public education in poor communities.
Nima: Public goods, right, exactly. So that’s just what’s funding in lieu of taxing rich people who actually have money.
Adam: Right. So this is important to understand. Traditionally, what pays for education in most states? Property taxes. Traditionally, what is the most progressive tax? Property tax. By definition, people who own property are typically not poor, by definition, and so instead of increasing property taxes, which upsets rich property owners, you say we’re going to, because that’s typically what funds education, not always, but typically, you say, ‘Oh, actually, we’re going to create a lottery or a lotto system and call it a stupid tax,’ and we all kind of mock it and sort of seems fun to make fun of, because it’s a regressive tax, and there’s nothing that the state loves more than the regressive tax that is not seen as a regressive tax. As we discussed in great detail in Episode 63.
Nima: As author Paul Ruschmann wrote in his 2009 “Point/Counterpoint” series on Legalized Gambling, quote:
Many states tell their citizens that lottery revenue supports the schools. For example, the Michigan State Lottery uses the slogan ‘You Play, Schools Win,’ and boasts that it has raised more than $12 billion for schools. That claim is literally true, but it counts revenue dating back to 1972, when the lottery began. In fiscal year 2005, the lottery’s contribution to the state’s School Aid Fund amounted to the only 5 percent of Michigan’s spending on public education. In New York, a 1998 report from the state comptroller put it about as bluntly as possible, without actually calling for a refund: ‘By dedicating it to education, there is an implied promise that the lottery will increase school aid…This has never happened in New York…Lottery money has never supplemented state aid; it doesn’t today and it likely never will…In New York, as in many other states, lottery earnings have been earmarked for education primarily as a public relations device.’
Adam: So we’re going to fast forward a bit and talk about another speculative market that’s exploded over the last few years, which is that of Bitcoin and cryptocurrencies. The great recession of the late aughts gave us what we now consider cryptocurrency, which was supposed to decentralize currency away from the big banks, which is to say kind of unregulated and unmoored from government and big bank control, but really kind of functioned as another vehicle for speculation, not unlike real estate. Only a handful of years later, in 2012, cryptocurrency exchange platform Coinbase was founded. Coinbase would broaden the pool of prospective Bitcoin buyers — that is, people of lower and middle incomes — offering minimum purchases of as little as $2.
Relatedly, some of the first NFTs are thought to have debuted around 2014 and 2015; one of the first was introduced by Ethereum, a crypto platform with its own cryptocurrency. Like cryptocurrency, NFTs are yet another recently invented speculation tool, with nothing objective beyond their ability to be sold later for profit.
Nima: NFTs, or non-fungible tokens, gained momentum starting in 2020, and by 2021, the marketing machine for them was in full swing. This happened during the pandemic and the economic crisis. Now, major media, including legacy newspapers and magazines, have clamored to cash in on this. For example: The Associated Press sold a 2020-election-themed NFT in March 2021 for $180,000. The New York Times quote-unquote “minted” an NFT of a tech column by Kevin Roose, raking in $560,000 that same month. The Economist sold one of its covers as an NFT for $419,000. TIME released multiple digital covers for an estimated $446,000 and has incorporated cryptocurrency investment advice into its quote-unquote “partnership” with personal finance site NextAdvisor. And for charity, The New Yorker magazine auctioned off an NFT of its 2021 9/11 anniversary issue cover.
Adam: Rolling Stone, in probably the most shameless cash grab, jumped right on the NFT-crypto bandwagon, exploiting its brand to join into a partnership with a Bored Ape Yacht Club. In July of 2021, Rolling Stone had a headline, “NFTs May Seem Like Frivolous Fads. They Should Be the Future of Music.” A few weeks later, Rolling Stone announced its own NFT collection with the much-hyped and much-maligned Bored Ape Yacht Club. In January 2022, right before the Super Bowl, Rolling Stone announced a partnership with Coinbase, again the cryptocurrency exchange platform founded in 2012. From a Rolling Stone press release, quote:
[Rolling Stone and Coinbase] will collaborate to mint an exclusive NFT (non-fungible token) that’ll be offered as a limited drop to the party’s Coinbase Wallet users. Later in the year, the original static design will be animated before it’s available for purchase on Coinbase NFT, a peer-to-peer NFT marketplace. The limited release will offer fans an extraordinary chance to own a piece of history created by some of the crypto space’s most influential digital artists.
Nima: Jesus Christ. (Laughs.) Those are the worst sentences I’ve ever heard.
Adam: Meanwhile, there’s been a growing effort to counter perceptions of cryptocurrency as niche or opaque or expensive or wasteful and inaccessible, thus expanding the market to middle- and lower-income people, and in some cases people of color. Spike Lee, Neil Patrick Harris, Alec Baldwin (pre his shooting), Tom Brady, and other celebrities have signed to be spokespeople for both NFT and crypto. In a July 2021 piece, The New York Times called this an effort to, quote, “make digital cash more palatable for newbies,” briefly acknowledging some of the dangers of this about 15 paragraphs in.
So it’s a Gold Rush everyone’s going to jump on, and generally the way it works is, mostly for crypto but increasingly also for NFT, which light crypto is trying to get more into the business-to-consumer spaces because the fundamental economics of it are, it’s not exactly a Ponzi scheme, it’s not exactly multi level marketing, but it has many, many the same elements, which is to say if you hype up whatever coin you own, or whatever currency you own, or whatever NFT vertical you own, because you own it you have obviously have a conflict of interest, you have an incentive to hype it up, it’s evangelical by definition, by its very nature, and so it’s a fairly unregulated market with a very low barrier to entry. So overnight, you have dozens of these well financed crypto startups with, you know, venture capital-backed startups, billionaire-backed startups that are clamoring for market space so they start, basically they inbound every celebrity with any kind of following — whether it’s Steph Curry, LeBron James, Matt Damon, Ben Affleck, whatever — they get 10 inbounds to go promote whatever bullshit crypto and it’s easy money, they probably make millions of dollars both in money and crypto, I’m sure they probably get paid in crypto too — although bulk of it, I’m sure it’s just cash — to do a two minute commercial, it takes them a day to shoot, and the money is too tempting to resist not to sort of absolve them of the responsibility. But basically, you need to hype it as much as possible so this is why over the last two, three years, you’ve seen this explosion in ad buys.
Nima: Because you need to expand the market, right? You need a broader user base, you need more money coming in.
Adam: They call it democratizing it or expanding it. Really what it is, is you need more dopes to buy your product so you can sell and make money.
Nima: A casino is not going to make money if the casino floor is empty, right? Like you need people inside.
Adam: And what they need more than anything is they need the last $100 in your bank account. It’s part of their market growth strategy.
Nima: Right. It’s not doing enough man, it has got to move. Get active right? You don’t want to miss out. So we’re going to go through a series of recent cryptocurrency advertisements that feature various celebrities. The first for CoinFlip came out in June 2021 and features Doogie Howser himself, Neil Patrick Harris.
Neil Patrick Harris: Ladies and gentlemen, the dollar bill just leveled up. I give you the future of commerce. Presenting an ATM that converts cash into crypto instantaneously. No lengthy logins, money transfers, waiting periods, just one simple transaction. (Bell) Crypto is cool.
Adam: No regulations, no SEC making sure you’re not ripping off Grandma, and so let’s listen to the next, sorry I’ve not been told it’s not a commodity, just to be clear, it is speculation but it is not technically a commodity. So then we have the crypto as a form of civil rights accomplishment.
Nima: Yeah this one’s great. This one from the next month July 2021 for Coin Cloud and features legendary director Spike Lee.
Spike Lee: Our currency is not current. Old money, as rich as it looks, is flat out broke. Don’t believe me? I got the receipts. They call it green, but it is only white. Where’s the women, the Black folks and the people of color? Native Americans got a nickel. A nickel! People don’t even stop to pick up a nickel outside. 7 million Americans have no bank account. 20 million are underbanked. Old money is not going to pick us up, it pushes us down, exploits, systematically oppresses. But new money, new money is positive, inclusive, fluid, strong, culturally rich. Where status is anything but the status quo. Do your own research. The digital rebellion is here, old money’s out. New money is in.
Nima: So there you have Spike kind of returning to his Mars Blackmon character from She’s Gotta Have It and then of course the Air Jordan commercials talking about how you know old money is very oppressive, old money meaning like cash cash, but new money, Adam, super liberatory, right? It’s going to lift up the people.
Adam: The new money is also owned by the same five old crusty white people to be clear. It’s a really, really, really cynical ad. It’s pretty depressing shit. You know, I once met Spike Lee, I was bartending a launch event for Absolute Brooklyn. He had a vodka brand that he was promoting, and I introduced myself, I said, ‘Mr. Lee, you know, I’m a big fan, I went to film school and I love your work,’ and he looks at me and says, ‘Have you tried the vodka?’ And he went on for like five minutes talking about the vodka, how much he loved it, how great.
Adam: So in Spike Lee’s defense, I think he genuinely believes his bullshit, because he cornered a bartender and started talking about how much he loved Absolute Brooklyn.
Nima: That dude is on brand, man.
Adam: So maybe he believes his own bullshit, probably, I don’t know, who cares. But this is obviously the point of, quote, “diversifying and democratizing,” this sort of great liberatory language just to expand the pool of dopes because you need people to inject cash into your product in order to inflate the currency so you can cash, out and so they use the language of liberation and kind of diversity in the same way that you use, if you’re marketing predatory lotteries or casinos you say, ‘Oh, well, we need to democratize people putting their fucking chip in the middle of a crap table.’ Well, okay, but that seems not really a form of liberation, that’s just another mode of consumption and exploitation, but it’s dark times we live in. But none of these are as bad as this totally dead-eyed Matt Damon commercial. Matt Damon is someone who’s sort of claimed in the past, his mother was a teacher, shows up the teachers unions, like sort of vaguely progressive, but again, they did the Krusty the Clown, they just backed a dump truck full of cash up to his house, and he couldn’t say no.
Nima: You’ve all probably seen this one, it came out right at the beginning of this year 2022, early, early January, this is Matt Damon’s now epic “fortune favors the brave” ad.
Matt Damon: History is filled with almosts. With those who almost adventured, who almost achieved, but ultimately, for them, it proved to be too much. Then there are others, the ones who embrace the moment and commit. And in these moments of truth, these men and women, these mere mortals, just like you and me, as they appear over the edge, they calm their minds and steal their nerves with four simple words that have been whispered by the intrepid since the time of the Romans: Fortune favors the brave.
Adam: And there’s a picture of Mars for some reason. I guess crypto has something to do with going to Mars.
Nima: This goes right back to the, you know, colonial lotteries being the place where adventurers find themselves, right? That this is about, you know, ‘Don’t miss out on the future, don’t stand idly by. Be bold. Be a man, Adam, goddamnit invest!’
Adam: It’s great. So Matt Damon is macho bating you. He’s saying don’t sit around and miss out because you were too weak to take the risk. Now of course, anyone who’s seen a huckster, really aggressive salesman, trying to sell you timeshares in Florida like Glengarry-style, they all do this tactic.
Nima: That’s right.
Adam: ‘Do you need to talk to your wife?’ ‘Are you a man?’ ‘Don’t you want to take a risk in your life?’ I mean, this is a classic salesman tactic, it’s as old as sales, right? You pitch people because anytime you want someone to take, it’s a risk, because I know there’s a risk, you’re effectively gambling, I mean, it’s what it is, it’s gambling, you’re gambling that if I buy $10 worth of this crypto, it’s going to be $12 or $50 in 2 weeks or a month or whatever. It’s a gamble. It has no underlying objective value unless you’re buying drugs or illegal content online, there’s not really a practical reason to have crypto. People keep trying to introduce it at bars and stuff, it just doesn’t make sense. It doesn’t work. The only reason you buy, 99 percent of the reason you would buy it is for speculation, for gambling, because you assume it’s going to go up in value, right? So their entire pitch is pretty much stripped of any pretense of any kind of objective market value or social value and saying, ‘Hey, let’s go gamble man.’ This is literally the speech I think that Edward Norton gives to him in Rounders, a movie, which by the way, I love, but it’s definitely a love letter to gambling. He’s ‘Don’t you want to go out, don’t you miss all the sweaty action and the checks of cash all over your face and it’s so much fun,’ and he’s this is a guy who’s like a recovering gambling addict of like five years and he’s like ‘Fuck it, let’s go, let’s just do it be a man.’
Nima: I wonder if you could easily just mash up and cross cut Matt Damon and Rounders with Matt Damon in the cryptocurrency ad.
Adam: Yeah. And of course, it’s like to be clear, I want to be clear, because some people may be listening to this like ‘Okay, what are you like a bunch of fucking Baptists, you’re opposed to gambling,’ and it’s like, that’s not really the point. The point is, is that they’re targeting and marketing to poor or vulnerable, more credulous demographics, because they’re trying to pick your fucking pocket, and there used to be a cultural and legal taboos against doing this at this scale and with this degree of shamelessness at this level, and those are beginning for both, again, for both legal and social reasons, are beginning to erode, and this is a media fueled bubble. It’s a media fueled speculation bubble where the most vulnerable, poor and most credulous, I believe, are going to be left at the end of the day holding the bag, if they’re not already.
Nima: And this is seen, I think, nowhere as clearly as in a very recent April 2022 crypto ad featuring Steph Curry, the basketball player, and actually takes a different tack, right? The audience it is going after is not just supposed to be adventurous and bold and take the risk, actually they’re saying you don’t even have to know how this shit works.
Steph Curry: This is Steph Curry, and he’s the world’s leading expert on cryptocurrency.
Man: I’m not.
Steph Curry: He’s not making pasta, he’s printing crypto.
Steph Curry: He mines Bitcoin from a giant block of ice.
Man: Definitely not.
Steph Curry: Okay, quit messing around man. Give me some tips on crypto.
Steph Curry: But you are an expert, right?
Man: No, I’m not an expert and I don’t need to be. With FTX, I have everything I need to buy, sell and trade crypto safely.
Adam: So time and time again finance media, business media constantly promotes these get rich quick stories just as they promoted lottery, nightly news would sort of show you who won the lottery, go to their house, talk to them, we need to show the winners in order to promote the speculative bubble.
So CNBC December of 2021, “This 32-year-old artist brought in over $200,000 selling NFTs. Here’s how she’s supporting women of color in the space.” January 2022, Fortune magazine, “A 15-year-old whose NFT art sales over the past year are now worth more than $1 million breaks down how he did it.” CNBC February 2022,‘I had $10 in my bank account’: This 36-year-old went from living paycheck to paycheck to making over $109,000 selling NFTs.” Next month, also CNBC, March 2022, “‘I kind of freaked out’: This 42-year-old artist made over $738K in 32 minutes selling NFTs.” And April 7, “13-year-old girl became a multimillionaire in 1 year by selling NFT art.” Blah, blah, blah. We hear these stories all the time, because they want to sell this idea that —
Nima: You need to see the payoff, right? The media has to sell the payoff.
Adam: Yeah, now that they’re selling NFTs directly to consumers they need to hype it as they hyped cryptocurrency, something that the average Joe can invest in or get behind or try to sell. Now one of the problems with this, of course, is that many of the crypto and NFT related technologies, there are institutional conflicts of interest. So large media conglomerates are directly invested in NFTs obviously, as we’ve discussed, they don’t directly invest in crypto because it’s not really what they do, but they do invest in crypto related technologies like blockchain, and they of course heavily invested in and directly own, increasingly own sports books.
So Comcast, a venture capital arm that’s worth about $170 billion, are heavily investing in blockchain and in their prospectus for this investment they cite the rise of crypto as one of the reasons why they’re investing in it. Viacom CBS, the Associated Press, New York Times also heavily invest in NFTs directly to consumers, as media is increasingly starved for funding, they’re turning to basically selling articles, covers, direct experiences with certain reporters as part of the NFT bubble. Now that’s cooled off a little bit, thank God, but for a while pretty much everyone was getting into it because it was basically free money. So all legacy media, pretty much Fox, Disney, who owns ABC, ESPN, CBS, Viacom, Comcast, which owns NBC and MSNBC and CNBC, are all heavily invested in the gambling business now. According to Financial Times Disney via ESPN is set to enter the gambling market in 2022. They acquired a 6 percent, this is in addition to the 6 percent stake they already own in DraftKings, in 2019 when it bought 21st Century Fox. They had a deal with Caesars that gives exclusive rights to ESPN to promote their betting odds. DraftKings and Caesars are prominent advertisers on ESPN and the network’s streaming service ESPN+ constantly links to their betting platforms.
In August of 2020, NBC Universal, which is owned by Comcast, jumped into the sports betting with PointsBet, which actually has Comcast colors and a similar logo and advertises on Comcast properties. And Fox, which owns Fox Network also has FoxBet, which is its own Fox branded sports book app. So what you see is, again, this kind of institutional marriage of media who’s supposed to be the guardians of the vulnerable, they’re so heavily invested in these speculative industries, that for the most part, with some exceptions, I think I saw one or two NBC stories that are critical, The New York Times has published stuff critical of it, but for the most part, there’s very, very little criticism that has gone into the explosion of the last $100 in your bank account economy.
Nima: Because it’s not just about selling ad time. So yes, there is advertising on the platforms, but they are directly investing in these technologies and in the betting platforms themselves. Meanwhile, other emerging gambling markets have become far more pervasive. Bitcoin’s value reached its greatest heights, so far at least, of $68,000 in 2021, and the market cap of cryptocurrency exceeded $2 trillion late last year. It has since fluctuated, but still hovers around that number.
Online casino streaming on platforms like YouTube and Twitch also escalated during the pandemic. Notably, these reach an especially young audience; Twitch reported in 2021 that 21 percent, so over 1/5th of its audience, was between the ages of 13 years old and 17 years old.
Now, amid Bitcoin and other crypto companies’ promises of liberatory banking, right, the democratization of investment, large shares of crypto wealth are still owned, as we’ve been saying Adam, by only a minuscule percentage of currency holders. A study from the National Bureau of Economic Research found that the top 10,000 bitcoin investors own a combined 5 million bitcoins, or roughly $232 billion, using prices as of late 2021.
Now, additionally, the NBER, that is the National Bureau of Economic Research, found that only 0.01% of all bitcoin holders controlled 27 percent of the digital currency. That’s even more skewed than the dollar; the top 1 percent control almost a third of total US household wealth, per data from the Federal Reserve.
Adam: So we talked about the harms of predatory or gambling that targets the poor in Episode 63 from 2019, but we sort of want to reiterate that a little bit to kind of establish the stakes. There’s not a lot of data right now about how much money people pissed away on Bitcoin, or increasingly NFTs, although I know NFTs are very, very small, relatively speaking, but we’re definitely going that direction, but gambling itself as a regressive tax is something that’s fairly well established. Study after study shows that gambling indirectly leads to increase in violent crime, suicides, divorce and bankruptcy. For example, just using lottery, which is now a very kind of quaint example of gambling, most lottery tickets are purchased in poor neighborhoods, people in the US who made less than $10,000 spent on average $597 on lottery tickets per year, about 6 percent of their income. As Vox reported in 2016, most lottery tickets were bought in places with higher populations of people of color. Nationwide, African Americans spend five times more on lottery tickets than white people. In Connecticut, places with high nonwhite populations tend to have far more lottery ticket sales than places with smaller nonwhite populations, something that’s been borne out by multiple studies. Similarly, writing in the Huffington Post in 2015, Max Galka found that the largest share of “problem gamblers” — those for whom gambling would be classified as an addiction — by income came from the lowest brackets.
And so when you talk about the sort of regressive nature of massive increase in legalized gambling, what you’ll get is these kind of pat libertarian responses where people say, ‘Oh, well, gambling was happening anyway, they just brought it out from behind the shadows.’ But we know that’s not true, statistically. We know that legalized, widely available, heavily publicized and heavily promoted gambling, whether it be gambling, or kind of crypto speculation or anything else like this, it does increase problem gambling, because of course it does. Anytime a corporation pushes something on you, it’s going to increase the likelihood that you’re going to do that thing, and I think there’s difficult questions, especially as abolitionists, how do you sort of manage that without criminalizing, obviously no one here wants to criminalize anything. I do think though, we need to be sober about why an economy that has a hard time producing things and has runaway inequality — during a pandemic where the top 20 Richest People saw their wealth increased by $5 trillion, and almost everyone else, especially once the aid was cut down themselves to be poor — why do we increasingly rely on these speculative industries? Why do we increasingly rely on these industries of speculation to extract money from people who cannot afford to engage in speculative activity? And why are people who are desperate turning to these actions to try to make ends meet? Because as we explained in Episode 63, and as we’ll talk about with Ed, for many people who are dirt poor, gambling can be rational, because you have no other means of getting out of a particular rut or poverty.
Nima: And that’s where the predatory nature of it comes in.
Adam: Yes, exactly. And this idea that somehow you’re democratizing it or not removing people’s agency, or whatever kind of liberal bullshit term they want to use, when you talk about making things widely available, accessible, because we made a joke in Episode 63, this is before sports books had come into play, because that was before, it was sort of right when they were made legal, where I said, ‘Well, what next, we’re going to put slot machines in the lobbies of housing projects?’ And we basically did something far worse, we put it in everybody’s phone. And I do think that, you know, as a society, instead of sort of stepping back and saying, is all this speculation, is all this gambling, is all this kind of desperate attempt for people to strike rich, is this a healthy way to organize a society, is this a healthy way to extract money out of the poor? Or is this just an economy that no longer really produces much of objective value? Or is producing less I should say. Of course, there’s still people who still cure diseases and build bridges and such. It’s not as if the entire economy is based on casinos. But it’s definitely increased, right? We see this casino economy increase, the addictive nature, we didn’t talk about the team of psychologists that are involved in creating these apps that extract value as we did in the episode on Uber, and I think that instead of having a conversation about that, and pausing and talking about the sort of social implications of this system, everybody just had big dollar signs in their eyes and saw the gold rush, and the media who was heavily invested in it had very little incentive to push back on this current explosion of a speculation economy.
Nima: To discuss this more, we’re now going to be joined by Edward Ongweso, Jr., staff writer at Motherboard and co-host of the This Machine Kills podcast. Ed will be with us in just a moment. Stay with us.
Nima: We are joined now by Edward Ongweso, Jr. Edward, it is so great to have you back on Citations Needed.
Edward Ongweso, Jr.: Thanks for having me on again. Excited to talk with you all.
Adam: So your piece did a fantastic job weaving seemingly separate issues into kind of one meta theme that I really thought I spoke to the times, which is that increasingly we see immediate fueled economy that we’re calling the “last $100 in your bank account economy,” where there’s a whiteboard somewhere in Silicon Valley or Manhattan where there’s a marketing major who’s mad, there’s too much idle money sitting in people’s accounts that hasn’t been monetized, and that this is sort of a crime that needs to be solved, and it’s the job of crypto and NFT and casinos and sports books and stock speculators and other related industries to kind of get their hands on it. ‘It’s just sitting there, it needs to work for you, don’t you want the action?’
Now, obviously, not all those who partake in the verticals we discussed are poor working class, but increasingly, they are under the guise of democratizing these systems. It’s kind of an Orwellian use of the word democracy. I want to sort of begin by talking about the normalization of these kind of gambling and speculative industries, moving away from the taboos, these aren’t new, but they are becoming more hardcore, more mainstream, as you write about, with traditional gambling or sports books being kind of one part of a broader ecosystem. What are the things that from your perspective is driving this need to get your hands on the last $100 in your bank account?
Edward Ongweso, Jr.: Yeah, you know, I think that’s really a good way to think of it. I mean, there are a lot of possible explanations for it. One helpful way to think, you know, for me, when I think about it is, you know, this piece kind of emerged initially, because I was looking into crypto casinos, I was looking into casinos incorporated in island countries, or in countries with relatively lax gambling regulations, where there was a lot of corruption, and they were letting shady corporations partner with Tiktok stars to gamble with house money so that children who watched them would, in flocks, in droves, join the site, give them links, give them, you know, hundreds of thousands of dollars and millions of dollars worth of revenue, and pump money into these casinos and pump the popularity into these casinos, right? And with these casinos, they were building on an already existing loophole which allowed gambling, relatively unlicensed, to operate inside the United States, even if it wasn’t allowed you could bypass regulations in whatever country if you’re incorporated in these islands. But it also gave people a really good way to resell and repackage already existing forms of gambling and spending that were maybe taboo or had been harder to market to younger audiences or had been dismissed as scams or exploitative. So I think one chunk of it is that a lot of this is the old hucksters adding a digital glean to their thing, and then there is another part who are fanatic grinders or hustlers, I really don’t know how to describe them, who really view all of life as some giant endless business transaction, and an LLC that, you’re one LLC away from being rich, or one, you know, quick trick and exploiting some loopholes or getting rich, they believe that you need, the only way you can really do this is by putting all your money into it, right? And flipping that money or making that money work or investing it in something and hustling on your own and being an individual grind, and if you fuck up that’s on you, and if you succeed that’s on you, right? And a lot of that is from seeing the end result of other people’s success being sold wise and visions themselves, and believing like the way to climb is to just be as ruthless of a capitalist as possible by doing tax liens to take people’s houses, doing scams and projects and endeavors which prey upon people or take as much money away from people as possible so that they can be rich then, and then there’s another group of people, I think, are really honest cynics, range from honest to dishonest cynics, right, who just don’t really believe in any of that bullshit, and just want your money and want themselves to get rich, and will come up with whatever they need to, to convince you to give them the money, they will say that this sort of gambling is an American tradition or tradition among people in general, that this sort of activity is supporting the community, supporting tax revenues, so on and so forth, that all that’s really different is like they’re connecting people to it, or saying that it’s not gambling at all really and that people that are saying it’s gambling don’t really understand that it’s a chance for you to have a financial opportunity to make your money work, right, taking all the rhetoric that other people use to justify what is very clearly an exploitative endeavor for them.
Nima: So, because you do study this, you do write about this so often, Edward, how do you see this relating not only to precarity and to, you know, people being able to wish for amazing things, what amazing things be kind of, you know, captivated by the idea of hitting it big because then they get to X, Y, Z, but also seeing this happen during a period of not only economic hardship but a now two plus year pandemic where precarity was put into even starker focus. In your work and in your writing, how do you see those related?
Edward Ongweso, Jr.: You know, I think it feels many times like an Ouroboros, right, where you have a lot of crypto projects, a lot of NFTs, a lot of digital assets connected to blockchain technology being pushed by a very small network of people onto a very large immiserated, precarious group of people. But also at the same time, you have large mass precarious and immiserated people looking for ways to make ends meet or to have something more than living paycheck to paycheck, and who are being fed by these orchestrated networks, by these PR campaigns, by the self dealing that occurs in a lot of these crypto projects and networks and investors and groups, they’re being fed the idea that this is their golden ticket, and they’re going to miss out if they don’t invest in it, right? So I think there really is a lot of trickery going on, a lot of PR that’s preying on people’s precarity that is a huge chunk of this, and I think also larger conditions, right? There’s just a lot of idle money, a lot of rich people are bored as shit and will throw their money at literally anything, because it doesn’t really matter to them, right? If you can throw a few $1,000 at this thing, and maybe I’ll go into $10,000, who cares? If you can charge a speaking fee or a show fee for pumping up this crypto thing or this NFT thing, right, and it doesn’t actually matter to you, why not? A lot of these things are connected to just the fact that I think, you know, there’s too much money. Rich people just have too much money, and they can afford to throw it at some of these things or they may be interested enough in throwing out these things and pumping up these things and driving interest in these things or be open to being pulled into doing any of those things for other groups of people, right? And that this kind of generates or helps generate this hype machine convincing people that they need to get on to this because everything else sucks, everything else is not getting the money and everything else costs too much.
Nima: Exactly, and especially if Matt Damon and Steph Curry are telling you to do it.
Edward Ongweso, Jr.: Paris Hilton, Jimmy Fallon.
— The Tonight Show (@FallonTonight) January 25, 2022
Adam: Yeah, because obviously, if a bunch of rich assholes were the only ones losing their money, we wouldn’t be doing this episode because who gives a shit.
Edward Ongweso, Jr.: Right.
Adam: But what it seems like more and more is that like any other Ponzi scheme, by definition, it needs new blood at all times. So what you’ve seen over the last few years is effectively a kind of crypto IPO, where you and, again, they use the language of democratization or putting in the hands of the everyday person, which is such a great kind of PT Barnum way to phrase it, right? ‘You get to get into this industry so you can hold the bag when the bubble bursts,’ and the democratization of speculative finance, which is really kind of what we’re talking about here — because again, I don’t think anyone’s heart leads if some guy loses a couple million dollars on crypto, you know, who gives a shit — is that because you constantly need new fresh blood, you need the unwashed masses to really get involved in these projects, and I think this is really where it becomes a sort of urgent political issue and one that the media, as we’ve laid out here, because they’re so deeply conflicted.
Adam: They’re heavily involved in NFT and heavily involved in crypto, very, very much involved in gambling apps, that they’ve fallen asleep at the wheel, and they’re not really reporting on it in those terms, and so one thing, because many of the same criticisms that we’ve leveled against speculative finance, again, none of this is new, but it’s gotten more targeted, more hardcore, and more a trickle down to people who maybe cannot afford to lose the money, many of the same criticisms that one would level against high finance and Wall Street, I’ll still apply here, namely, the fundamental fact that none of this stuff has any intrinsic value, it has no objective value. It’s not curing a disease, it’s not advancing human knowledge or culture, it’s not a longer lasting light bulb, a faster train, you know, maybe they’ll say it creates market liquidity, or maybe it’s entertainment, but it has no objective underlying value, and this is why, this has kind of been the impetus of much of the criticism, especially of crypto, and people handwave it away by saying they’re just a bunch of dinosaurs. But other than speculation, because a lot of NFT stuff, especially in the metaverse is all speculation, it’s basically, you know, they’re comparing it to kind of turn-of-the-century land grabs in Oregon and California, this is going to be the future, we’re just kind of getting in on it earlier. Speak to the issue of a lack of actual objective value. Now I know, levity, and frivolity and sports and gaming are things that are not necessarily have objective value, but this seems different than that, it seems to me like it is truly a kind of moral rot, without being too moralistic about it, that it is literally just moving numbers on the screen, and at the end of the day that we’re going to turn the milk and the cream is going to rise to the top to a handful of rich people, and at the end of the day quote-unquote “normal people,” poor people, average people, working-class people, however you want to frame it, are going to be the ones left with the bill.
Edward Ongweso, Jr.: Yeah, you know, I think in the end of March, there was a study that came out from this blockchain analytics firm called Nansen, where they looked at, you know, almost 20 million NFTs, and they found that pretty much a third of all NFT projects, collections essentially, just expire, they’re never traded or they’re hardly traded at all, they’re just there, wasted. Another third are sold for less than the amount it takes to essentially mint them. So the base costs to produce them. So right off the bat, we’re seeing like two-thirds of the market is useless, right, two-thirds of the market is just bust, it’s either never touched, or it ends up declining to the point where it costs more than it made to create it, and that remaining one third overlaps pretty significantly with other findings that have found that it’s all pretty much been wash trading, and wash trading is essentially, when I take a, let’s say I want to make a stock look more appealing to an investor, right? Or I want to generate volume on a trade and suggest that more people are interested in it than they really are, and maybe I’ll help bump up the price, then I buy a stock and I orchestrate it so that, you know, I’m buying it, selling it to myself, maybe selling it to someone, you know, we’re buying it, we’re selling it to one another, orchestrating trade so that it’s between myself or some other group of people, right?
Nima: It’s like having the guy in on it when you’re doing Three-card Monte.
Edward Ongweso, Jr.: Yeah.
Nima: The plant in the audience, right, being like, ‘Oh, this, this seems absolutely fascinating, number three!’ And then it’s like, ‘Oh, if they got it, I can do it,’ and then that person leaves but really they’re just splitting all the profits in the end.
Edward Ongweso, Jr.: It’s like, wow, who is buying this ugly ass ape so much? It’s worth $3 million. That’s crazy. It was worth $400 yesterday, right? I mean, this was the driving force behind the second biggest NFT market, right, looks rare, which itself had something like 90 percent of all the trading that happened on it within the first few months was just wash trading, like almost $8 billion worth of trades and just people trading them back and forth between each other. So we can look at it instead of saying, well, we can say yeah, it has some value, but the value is not really to the public, it’s not to any real social utility, it’s to investors and speculators, and that gives it a lot of value. Even though it’s parasitic, even though it’s extractive, it has a lot of value to people who just want to turn their dollar into a thousand or their thousands into ten thousands or ten thousand into a million, right? That is why fraud, wash trading, insider trading are so rampant in these sorts of exchanges and spaces, right? Because at the end of the day, the real value is just money, right? Just future profits. Just the idea that maybe you can be one of the one third of NFT collections where there’s actually an increase in value, and that you’re not getting in too late to it where the insider traders and the early minters and all the early adopters are the ones who are getting real value because they convinced you and paid other people to pump up their product, right? So the real value is just wealth uplift, transferring funds from one pocket to another, and that is important to a lot of people. But there’s no social utility in a lot of these cases, right? A lot of the times they’re held up as interesting ways to do proof of attendance or innovative art forms or ways to make for unique digital experiences, but all of these things not only already exist, but wouldn’t have additional costs that come on to putting it on a blockchain, transacting it on the blockchain, paying for the energy costs, paying for the transaction fees, accounting for the volatility of the underlying currency, right? All of that shit is just extra shit for other people to suck out money at each step of the interaction, and that’s really all that they have to offer, I think. It is just additive steps to get money stolen.
Adam: I think that’s why all these alarm bells went off the second crypto went from this kind of b-to-b to b-to-c, where it didn’t happen overnight, but it sort of did. Where it’s now every single celebrity and their mother is pushing some kind of digital currency or non-fungible token overnight because they couldn’t keep selling to themselves, and you needed new blood, you needed a new revenue stream and then, again, the 95 percent of the unwashed masses had $100, $200, $300, $500, thousands, $10,000 sitting around so we needed Matt Damon to say, you know, his commercial is basically like be a Roman don’t be a fucking —
Nima: Don’t miss the next big thing, right? ‘Take a chance.’ ‘Be bold.’
Adam: Basically, the commercials are all just like, jump in now, and like anyone who’s looked at old timey newspapers of fucking Ponzi schemes or scams knows that’s the language you use, you do the male gotcha ego thing, and you realize that, oh, my God, the second suddenly something turns to b-to-c, so Cletus home watching the fucking Super Bowl can be like, ‘Oh, yeah, I can get rich.’ It’s like that is the time to get off the train.
Edward Ongweso, Jr.: Yeah.
Adam: Because you clearly are just looking for new blood. This is again, people who sold Costco knives in high school know what this looks like. It’s the same thing
Nima: Well, but it’s also leveraging this idea that everyone wishes that they bought that one share of Apple stock back when they were 11 because now you’d be a billionaire, like that kind of thing, and so all the marketing also has this, ‘You may not understand what this is now, no one does, but just get in it, because it will inevitably make you rich down the line,’ and you don’t want to be sitting there as like a frustrated old person being like, ‘Oh, I should have gotten on that crypto train when I had a chance.’
Edward Ongweso, Jr.: And it’s worth thinking also about what are some of the ways that these companies are trying to convince you to get on to this thing, which they claim is the future. They’re using celebrities, of course, but they’re also, a lot of them are doing sweepstakes and lotteries, saying, ‘Well, you know, join now and your name will be entered into a lottery for a million dollars worth of bitcoin,’ one or three people, for example, will get one of $3 million prizes if they signed up through the QR code add that Coinbase had in the Super Bowl. I mean, why would a company offer $1 million worth of crypto if you joined the site? Well, obviously, it’s just to gin up the numbers because it’s more important to them and they gain more value if they have as many people join the service or they can insist that, you know, based on the metrics, that this proves there’s just an underlying interest in Coinbase and in crypto, and in the future of the economy as opposed to winning that money and winning the free crypto because people are desperate and they like to play the lottery, which goes back into the gambling, right? A lot of people do these things because there are not really many other options for them except these which are sponsored by the state, or sponsored by celebrities, or sponsored by wealthy billionaires and their friends who hoard around various companies, and, you know, they hoard around them and shell them out to people or show them out to people.
Nima: Yeah, I mean, that actually gets to this idea of, Adam and I often talk about, not wanting to sound too moralistic or too scoldy, too like the Temperance Union, you know, but the idea of corporate media-backed gambling industries, right? And there’s something just really creepy and kind of seamy about it, and it’s not that, you know, everything should be illegal, right? It’s not about like, ‘Oh, let’s get to prohibition necessarily,’ but there does seem to be a real cultural shift lately, and there’s obvious glaring conflicts of interest in that virtually all major media conglomerates are directly in the pocket of the sports book industry, if not participating in it directly, and many more pushing NFTs and cryptocurrency, right? So what is the long term risk here of the media being involved? It’s not even just the state having lotteries or going to a casino somewhere, the idea that media companies themselves, which are, you know, allegedly, for the state style, you know, guardians of the vulnerable, should be, you know, illuminating things — now, granted, this is Citations Needed so we know that doesn’t always work — but that the media companies are heavily invested in, again, bilking you out of, as we’ve been saying, the last $100 in your bank account, right, getting in on this kind of just snatch and grab, literally the last vestiges of people’s survival cash, that kind of economy, where are those huge dangers because the media is now directly implicated?
Edward Ongweso, Jr.: Yeah, I mean, I think there’s a good analog here with how the media handled the gig economy and Silicon Valley. A lot of people were incredibly incurious and lazy with their reporting, except for the labor reporters, and would do experiential pieces about how fun it was to deliver for a day, they would do sit downs with PR people or with executives, and just exactly what they said without any sort of contestation, they would do inside pieces that would, you know, be profiles of engineers or individuals inside of these companies, they would do, you know, press releases for upcoming products or moonshot projects that would never work and then submit or subject the actual subject any real critical analysis, economic, social, political, what are the consequences of this? How’s it being funded? What are the ramifications on the regular person? What is the regular person’s experience, right? Now, there’s the beginnings, like around the time that I started doing reporting is when we started to see a push and then a wave of focus on labor reporting, especially in the gig work, and I think similarly with crypto, there is skepticism, and I think I’m thankful and happy that there is at least a general sort of like, ‘What the fuck is this shit?’ You know? ‘What the fuck are you saying?’
Nima: (Laughs.) You mean it’s not just me.
Edward Ongweso, Jr.: (Laughs.) Right. But there’s far too much green-eyed wonder about what the hell is going on, and a lot of people take for granted what crypto projects tell them, a lot of people take for granted what the goals or stated goals of a project are, and that results in some people doing reports on crypto projects that turn out to be rug polls and never, you know, following up, that results in some people amplifying groups and projects that turn out to be backed up by people with right-wing or incredibly terrifying politics, right? Giving them influence or giving them an amplified platform. The lack of scrutiny is still there because I think there’s a tendency to, in the early stages of some sorts of, some types of technologies, rely on a combination of access, assumption of goodwill, and also just boosters may be elbowing their way into the space, right? But we have to be critical about these things.
Adam: Yeah, we’ve seen a lot of crypto-adjacent journalists actually join the crypto industry. There’s at least three examples I know of.
Edward Ongweso, Jr.: Yeah, you know, it happened with the gig economy, it happened with Facebook, it happened with Twitter, it happened with Google, with Amazon, there’s always going to be a contingent of people who will do this stenography and then eventually transition, and there’s always going to be a group of people who will not be as critical as they should be.
Nima: It’s just their job interview.
Edward Ongweso, Jr.: Yeah, you know, and I mean, just recently, didn’t the executive editor of Verge left to join one of Google’s accord teams? And there’s I haven’t seen much explanation of, okay, at what point was he in the interview process, at what point did they pull off from reporting on Google, because he was reporting on Google for a very long time. I mean, these are all basic questions and red lines that should be a little bit more transparent, but aren’t, and are kind of widespread in the industry, at least in relation or feel like they’re widespread in relation to the industry with Silicon Valley. And with crypto, the fact that there’s such a vibrant PR operation by these companies, I think really runs the risk of getting some journalists to believe the hype and drink the Kool Aid, report these lies back to people, and help insulate it from scrutiny. I mean, this is not just some fun, adventure, exploration into the future of finance, if you really believe, like let’s take seriously the claim that it’s the future of finance, right? It’s an unregulated financial system, if we’re looking at DeFi, its unregulated assets, if we’re looking at NFTs, unregulated currencies, if we’re looking at tokens, like Aetherium and Bitcoin, right, that they’re using to replicate institutions and relations in the traditional society, in the traditional markets, and traditional finance, in other parts of society where they’re regulated, and other people know the risks going in, and if they lose, they can get protection or they can be made whole again, that’s not the case there, and those things are continuing to grow. They’ll be integrated into the larger economy as banks, and as other companies integrate them, and try to make money off of them, and they’ll still have the same systemic risk, right? The decentralized finance, for example, right? There’s not too much scrutiny from journalists about DeFi outside of, you know, there was a recent piece, Charlie Warzel did his Galaxy Brain newsletter in the Atlantic where he interviewed this academic who’s posited a question about whether or not decentralized finance, and that’s cryptos, attempt to make a new financial system without intermediaries. Is this just shadow banking 2.0, right? In the system, they have recreated credit default swaps, they’ve recreated mortgage backed securities, and they’ve made even more esoteric, complex and dangerous financial instruments that anyone can play with, and that if they grow up to be a larger chunk of the economy would pose like a pretty fucking serious risk because I can invent a token, as one example, me and you can invent a token, we can say it’s worth some value, you can peg it to some asset, we can use it to borrow to get another asset and use that to borrow to get another asset and use that to borrow to get another asset, and then start playing around with all of that. But if the underlying things are worthless, which they almost all are, then you’ve just created a lot of debt and leverage out of imaginary assets, and my concern here is that a lot of times the reporting is more, ‘Let’s figure this out,’ instead of just being clear, like, I don’t think the shit should exist. I don’t think these things should exist, right?
Adam: Well, because reporters are not supposed to ask existential questions. They’re supposed to repeat the criticisms around the margins.
Edward Ongweso, Jr.: I think what you’re talking about, the moralism is a big issue, like how to talk about these things, because you don’t want to replicate the way that people already use moralism to hide their classism or hide this or that bigotry that they hide. But it’s also like sometimes, there’s some coverage of tech companies, of economic endeavors, you know, something that’s happening in the world that uses very moral rhetoric and then the suggestion is an incredibly lame, stupid reform that we’ve tried a thousand times, it doesn’t work. People will talk about Facebook being an existential threat to democracy, right? An existential threat to global governance and sovereignty of states. The solution? Make a group of people at the FTC who sit down and watch Facebook. Okay, you know, thanks. What are we supposed to do with that? And I don’t know how to balance the need to be moral and say these things have to go with like, when we do you start to get moral, a lot of times you just use it to punch down.
Adam: Well, yeah, because I think oftentimes, what a lot of these crypto guys will say is, ‘Oh, well, you what, you prefer the old way with the banks?’ And I’m always laughing, I’m like, no, we’re leftist we don’t really, what do you think occupy was about, you’re just reproducing these things in a more extreme, like, ‘I’m allergic to chocolate.’ It’s like, ‘Oh, well, you don’t like Hershey’s but what about the chocolate fountain?’ It’s like, ‘Well, no, I’m allergic to all of it, I don’t like any of it.’ And it’s not some got you, it’s like, because like you said, it’s just, it’s just reproducing the same inequities, it’s reproducing the same systemic risks, it’s reproducing the same classism, racism, inequality, I mean, it’s just a more hardcore, less regular version of it, and off course, there’s so much overlap with who’s invested anyway, it’s not like it’s even that distinct. It’s sort of just who got in early and who didn’t get an early really is the big distinction, but I want to talk a bit about the moral issue, because I actually sort of don’t think there’s anything necessarily wrong with being moralistic, if it’s grounded in a kind of rigorous class analysis versus some kind of superstition, and I do think that it is reasonable for people to look at an industry and be like this has no underlying social value. How do we articulate that as being an existential problem without it, with an understanding that things can be fun or entertaining, but don’t necessarily need to cure cancer necessarily to have social value? But this has now gone to the point where, where there’s, because things do need a kind of overarching moral logic to them, and this kind of brings up a particular kind of crypto guy because you write about a lot about crypto and NFT, I know you’re run into a particular type of guy I want to talk about, which is that any kind of Ponzi-like arrangement isn’t necessarily evangelical by definition, because you need to have, for each person who takes it, you need five more to spread the risks to take the bag. So evangelism is built into the model, which is why there’s so many fucking hardcore crypto guys on social media, because there’s this very fine line between self interest and ideology, and I think they blur into this kind of singularity of bullshit, where you can’t even tell if it’s venality or if someone truly believes it, and at a certain point, it doesn’t really matter. I want to talk about this particular type of guy, I know that you’ve run into them a lot, and how this becomes its own ideology, and whether or not building ideology into the system itself, I think is part of this kind of mystical libertarian origin is part of the what makes it so effective. It’s not, you know, if people are just all mercenaries it wouldn’t really work, they have to be mercenaries who sort of truly believe in their own mercenary endeavor and it very much mimics certain evangelical religions. So I want you to comment on that particular type of guy, and what steps you take to kind of maybe deprogram this type of guy, and when you do encounter them, how fucking batshit are they?
Edward Ongweso, Jr.: Yeah, I mean, it’s hard because there are some, like you said, there’s a core of libertarianism that’s operating here, and various flavors of this may say that greed and self interest are good or they may say that institutions that we have, and that we value that prioritize solidarity among people and trust in others, and sort of public or communal goods or services are bad, or that things need to be brought in to a quantified realm so that transactions are clear, or that things need to be executed by code. You know, there’s all sorts of groups of people who truly have some, frankly, batshit idea about how society should be run, and crypto, more or less, has an opportunity to do it because I think, at the end of the day, all of this is like, you know, various projects, they all offer an attempt to pick away at the way that society is organized as is and try to help build a foundation for like that core libertarian, future vision, right? Regardless of how silly or stupid it is, and a lot of these visions are stupid and silly, right? But then we get into the guys where some of them believe in that ideology and you can’t really reach someone who’s, I don’t think you can reach a lot of the people when you’re speaking to them with crypto, about crypto, if they are operating from that sort of libertarian basis, right? I think it’s easier to speak to people and convert people about crypto if they are getting pulled into it from a different angle. If they are someone who sees it as a chance to shake things up or to change some existing dynamic or institution or financial service or product, but not as part of this whole totalizing view that the world needs to be rugged individualist, who are atomized and compete with each other in the marketplace are dealing with automatically executed codes and contracts, clearly quantifiable terms, financial systems that they build themselves and interact with themselves, total control of their money, things like that are harder to deal with these people and they are zealots in the truest sense. There are others who understand the ideology, are probably versed in it, are cynics, and those are also individuals that are a bit hard to deal with, and there are plenty of both of these groups that I have to deal with every day but the ones that I frankly, have the most productive conversations with, and also, you have the largest chance of changing the minds are people who, you know, a lot of people are atomized, a lot of people are alone, a lot of people are in search of something — money, community — that might make their life a little bit better, more manageable, more bearable, and frankly, a lot of crypto projects do offer that, right? Even if they can be scams, you know, I’ve spent a lot of time in these communities and a lot of people do have fun trying to build something, and sometimes I find it shattered because it’s a scam. Sometimes that fun dissipates because the project isn’t feasible, sometimes that fun continues on and they do build something, but a lot of times, you know, I think it comes down to trying to communicate with people about why crypto actually is what this project actually is and seeing why they, you know, why they believe this or that is the way forward, right? Because I think a lot of people do think of these projects as innocent, isolated, offering a chance for them to make money and friends but also to build something themselves or be part of building something that might help other people, not realizing that a lot of the times these things are projects that don’t really have a clear use or application, really only plug into the ecosystem to make itself or other projects money, or to feed the hype machine, or to never actually be applied or scaled up, and so they’re kind, I mean, I wouldn’t want to say that wasting time and energy, but if you’re going into a project because you want to build something that you believe is going to be a part of the future of the economy, and it’s doomed from the start, or there are problems with scaling up from the start, or it’s part of one of the ones that will build up, it’s hard to simply say like, it’s worthless to that person, but I think that you can have conversations with them about what crypto is or a lot of what these crypto projects are, or just, you know, plugins to a larger scheme to pull money upwards, and to create a world where the market dominates more and more of our lives, and you know, it’s already demeaning to have to spend so much of your life dealing with selling your labor unless you starve, right? But the world that a lot of these people are envisioning is a world where everything you have is either a tradeable or sellable or has to be traded or sold for, right? And everything that could have a value will be valued and has to be purchased or traded or obtained instead of just outside of the market as some things are, and I think a lot of people when they’re presented with the pictures of what the world actually looks like, what these projects actually plug into, would, you know, pull away, in my experience, because it is a horrifying, I think anti human vision, it’s a vision of the society for the market and not for the people.
Nima: Right, because it seems almost like it’s liberatory but it’s actually really, really extractive, like it gives this false sense of liberation and creates something new when it’s actually just feeding the same thing that’s feeding so much oppression already.
Adam: Well, because everything has to be monetized. I mean, it’s a virus and it has to infect every cell. I mean, I think that’s kind of, without being too romantic about sports, because I know that, you know, they exploited labor in college and bastions of reaction and militarism and all this sort of bad stuff that goes along with it, when you do see Bob Costas humiliate himself in the World Series talking about how many strikeouts Blake Snell is going to get, if it’s going to be four and a half or five, in the middle of the game, there’s, there’s something kind of it’s like, okay, this is like the one last, there’s one more thing we just have to generally exploit. We’re making $80 billion, but we needed to make $81 billion.
Adam: And everything becomes commodified. It does, again, something that is already very commodified, I’m very jaded and cynical about the nature of American sports, but it does seem like every single nook and cranny of our lives is getting colonized by these forces, and it does on a kind of basic, intuitive level, seem kind of unsustainable, it just seems like it’s infinitely regressive.
Nima: You don’t think it’s worth something trying to bet, you know, on how many times you’re gonna see Sam Jackson commercials? You don’t think there’s something pure in that?
Adam: Yeah, I mean, I don’t know I, again, I don’t want to be too romantic about it, because I do think that it’s not as if we lived in some, you know, social democratic paradise before but I do think it’s getting increasingly, increasingly degenerate.
Nima: And then sportsbook came. No, of course. DraftKings is not, was not the only thing.
Adam: Yeah, like, I’m not, it wasn’t the Garden of Eden by any means, but, you know what I mean?
Edward Ongweso, Jr.: There’s been a war on just the little that we have for decades, and this is just a really brazen attempt to steal, or to set up the steal for the rest of it. I hope it’s too brazen to take hold, because I think there’s a lot of energy spent trying to paint peoples’ immediate response to crypto as simply not understanding it, when in reality, I think a lot of people just understand it well, and that’s why they kind of are like, ‘What the fuck,’ you know, like, the appropriate kind of gut reaction, ‘This has no value, and for me to get involved in it, I would have to enmesh myself in a system,’ and then in that system, it would have value, right? And if I’m going to enmesh this ecosystem, if I’m enmeshed in, you know, these projects or in these transactions that require it, then yeah, it would have value to me. But, you know, as I am right now, I don’t really understand why I need to connect to this thing or onto blockchain and crypto technologies. I mean, there are some applications, but we’re not, we’re in an ecosystem that’s dominated largely by a few billionaires, their best friends, colleagues that they work with, right? Celebrities that they’ve hired, and boosters that they pay, right? That’s not a place in which I’m interested in exploring what the actual use of anything related to crypto might be. I would, you know, clear out the parasites first before we do any of that.
Nima: Well, Edward, I thank you so much for putting it that way because it makes me feel like I now don’t have to say that I totally don’t understand what it is, but that I understand it all too well.
Edward Ongweso, Jr.: Yeah.
Nima: Just know that it’s a bunch of bullshit. So thank you for that. I’m going to pretend that that’s true. Before we let you go, please do tell us what else you are up to. You’re a very, very busy person. Not only do you write for Motherboard and co-host the podcast This Machine Kills, but you’re also a writer of other things. What have you been up to lately?
Edward Ongweso, Jr.: Oh, yeah, I’ve been in the woods in Virginia working on a sci-fi book and book proposals for nonfiction that I’ve been trying to get out, and so hopefully, you know, God willing, all that stuff will come out next year or the year after. I don’t actually know how scheduling for books works because I haven’t written one. But yeah, I’ve been writing sci-fi for a long time, and been working on nonfiction stuff, some history of tech and some history of sabotage and Luddites in this country that hopefully will find a way into people’s hands someday soon.
Nima: Well, that sounds amazing. Look out for that, everyone. Of course, we will have you back on. Edward Ongweso, Jr., staff writer at Motherboard and co-host of the This Machine Kills podcast, always a pleasure to have you on Citations Needed. Thanks for being here.
Edward Ongweso, Jr.: Thanks for having me on.
Adam: Yeah, you know, one thing we actually didn’t talk about is the increase of microtransactions in gaming and how those reflect gambling, and in fact, in many ways they’ve been these kind of loot boxes and stuff is actually effectively gambling, and how that’s become a huge growth vertical for gaming.
Nima: Or it’s just extraction.
Nima: It’s just looting. Looting people’s last pennies, you know, I always like reading Ed’s pieces and talking with him, it was great to have him back on the show, because it makes me feel like I understand this stuff a tiny bit more, while still completely, really not understanding why this stuff is appealing, and yet, and yet, Adam, as we’ve talked about, both on this episode, and also offline, this stuff is really important to understand, because regardless of whether there is any intrinsic value, any real value, whether this is all bullshit, it’s all a fucking scam, it is still actually relevant because it is taking money out of people’s pockets or their bank accounts or their speculative bank accounts.
Adam: Yeah, it’s just a broad question of is this the way you want to organize society? Do you want to have a society with sharks and marks and they’re just constantly finding new ways of picking people’s pockets? New exotic ways of, again, you can call it entertainment or gaming or whatever euphemism you want to use, but basically what it is, let’s keep churning the milk until the cream rises to the top, and it goes to a handful of counties in Virginia, Connecticut, and California. And I think that’s something that Ed’s piece touched on, which is why we sort of built our episode around it because it is a cultural trend, and it’s a cultural trend that has intrinsic, deep seated conflicts of interest in terms of media coverage, that it’s, you’re going to get sporadic, critical coverage around at the margins, at best, especially in sports media. I mean, there’s not a single sports media vertical right now, whether it’s a YouTube channel or cable, it’s all betting apps. I mean, you’re not going to get any critical coverage from any of that. I mean, even Vox SB Nation is all covered by DraftKings, and it’s like, this was supposed to be the kind of vaguely left, and of course, they’re not going to publish anything critical of sports betting now, so it’s just, it’s gotten so ingrained into our media culture that I guess the whole point of this episode is a little bit of a yellow flag.
Nima: Well, what do you have play by play and color commentary also talking about beating the spread or whatever, you know, parlays have, it’s, you know, and then the little bottom scroll or the bottom chyron on the screen is about the betting app that you should go to and, you know, before every fucking commercial break that is said by the announcers, and then you go right into DraftKings or Caesars or cryptocurrency ads right away. So I mean, it is everywhere. It is ubiquitous right now.
Adam: They want the last $100 in your bank account.
Nima: Yeah, exactly. I mean, it is all about building a larger base, so that the people who are going to make money on this, or are already making money on this, can make more because they need the money to be coming into them, and just like lottery, just like gambling, the pitch to you, the dupe, is, ‘Hey, you could strike it rich too, don’t be left out.’
Adam: Right. Because if I see an ad for a toothpaste or a Toyota, it’s like, they’re trying to sell me something. They want me to buy their toothpaste or their Toyota. But when you see an ad where they’re like, ‘We really, really need your money,’ well, okay, what do you sell me? A chance to win?
Adam: I mean, it’s Trumpville, right? I mean, obviously.
Adam: But the question is, again, whether or not the entire economy should be built around shearing the sheep as many times as possible and I would think that maybe not. Maybe some people in the newsrooms should question whether or not this should be something that they’re constantly pushing on their consumer. I don’t know.
Nima: That will do it for this episode of Citations Needed. Thank you everyone for listening. Of course you can follow the show on Twitter @CitationsPod, Facebook Citations Needed, and become a supporter of the show, if you have not already please do, through Patreon.com/CitationsNeededPodcast. All your support through Patreon is so appreciated as we are 100 percent ad free and listener funded. And as always, a very special shout out goes to our critic level supporters on Patreon. I am Nima Shirazi.
Adam: I’m Adam Johnson.
Nima: Citations Needed is produced by Florence Barrau-Adams. Associate producer is Julianne Tveten. Production assistant is Trendel Lightburn. Newsletter by Marco Cartolano. Transcriptions are by Morgan McAslan. The music is by Grandaddy. Thanks again for listening, everyone, we’ll catch you next time.
This Citations Needed episode was released on Wednesday, May 4, 2022.
Transcription by Morgan McAslan.