Dangerous Speculation Th E Appeal of Pyramid Schemes in Rural Siberia

ARTICLES Dangerous speculation Th e appeal of pyramid schemes in rural Siberia

Leonie Schiff auer

Abstract: Th e people of Aga, a small district in southeastern Siberia, have in recent years become managers, missionaries, and victims of a wave of pyramid and Ponzi schemes. Th e schemes come with the promise to make people rich. In reality, they benefi t only a small minority of investors while increasing fi nancial diffi culties for the majority of participants and causing severe social confl ict. Th is article deals with the local manifestation of these economic forms. Based on the ethnographic investigation of a pyramid scheme, I discuss techniques of make-believe in order to show how ordinary people become involved in a fi nancial hoax. My discussion provides insights into the ways in which speculative thinking shapes imaginative horizons, pervades social logics, and impacts economic realities in a post-Soviet environment. Keywords: capitalism, fi nance, gambling, multilevel marketing, postsocialism, pyramid schemes, Russia, Siberia

Following the demise of the Soviet Union, a cialism. Sooner or later, however, as is bound to wave of pyramid and Ponzi schemes swept happen with fi nancial pyramids, all the schemes over formerly socialist territory. Get-rich-quick collapsed. Whereas a small minority of people schemes were proliferating in several newly at the top of the pyramids had made money, the capitalist countries such as Romania, Albania, majority of participants lost their investments. and Russia. Th e promise of wealth appealed to Some of the schemes that proliferated during millions of people who paid money into the the 1990s were huge in scale. Caritas, a scheme schemes hoping that these investments would launched in 1992, touched at least every fi ft h make them rich. Prominent politicians sup- household in Romania and involved sums that ported pyramid and Ponzi schemes in various came close to the country’s gross domestic places, claiming that they would help people product (Verdery 1996: 174). In Russia, it was a manage their precarious situation in the eco- Ponzi scheme called MMM that became hugely nomic tumult that followed the end of state so- popular and spread across the entire country.

Focaal—Journal of Global and Historical Anthropology 81 (2018): 58–71 © Stichting Focaal and Berghahn Books doi:10.3167/fcl.2018.810105 Dangerous speculation | 59

Th e scheme was initiated by the mathematician both create networks of enthusiastic devotees Sergei Mavrodi and developed between 1992 spanning national borders; and both promise and 1994 into one of the largest fi nancial scams health and wealth. Th e appeal of charismatic on formerly socialist territory. Massive adver- Christianity in formerly socialist countries has tisements in public spaces and on television been seen as being linked to the disturbances, promised 50 percent interest on investments. chaos, and problems caused by the fall of the Investors, however, were paid with the money of Soviet state and the confrontation with the free subsequent investors. Aft er six months, 15 mil- market (Pelkmans 2009). Under conditions of lion people had paid money into the pyramid. uncertainty, disorientation, and a struggle for When it collapsed, those who had come fi rst survival, the new vision of the future and new made a profi t, but masses of people lost their forms of meaning off ered by these religious money and several investors committed suicide movements proved attractive. Pyramid schemes as a result (Borenstein 1999; Smirnova 2012). may be appealing to people for the very same Because of their proliferation during the reasons in such a context. Jean Comaroff and period of post-Soviet transformation, it can be John Comaroff (2001), for example, understand assumed that the schemes’ popularity must be religious resurgence and the widespread ap- understood in the broader context of social and pearance of “occult economies” as being linked economic change. Th e heavy economic crisis, to the culture of neoliberalism. Especially in which characterized the economic situation in societies that have recently been subject to sig- the former Soviet Union during the 1990s, cer- nifi cant economic change, disrupted lives and tainly contributed to the appeal of moneymak- increasing inequalities make people feel left ing schemes. Like in other parts of the world, out of global prosperity. Comaroff and Coma- high infl ation, a drastic drop in income, and roff see both money magic such as pyramid problematic access to money drove the prolif- schemes and the rise of Pentecostal Christianity eration of speculative schemes (Verdery 1996). as responses to the experience of an enigmatic Th e new signifi cance of money in the newly capitalism that express an attempt to come to capitalist economy was not merely because of terms with the puzzlement resulting from new the economic crisis, however. Th e former Soviet forms of wealth. citizens’ relation to money changed fundamen- When the economic situation began to im- tally with the transition to capitalism. Whereas prove aft er the turn of the millennium, the Rus- personal connections had oft en been more im- sian people’s concerns over money shift ed to a portant than money when it came to getting new sphere: debt. Whereas borrowing money access to desired commodities, these relations in the Soviet system had been highly regulated became increasingly monetized in post-Soviet and therefore largely devoid of risk (Rona-Tas Russia (Ledeneva 1998; Pesmen 2000; Rogers and Guseva 2014: 33), in Russia’s new neoliberal 2005). Money was no longer the medium of economy banks started off ering consumer loans exchange that it had been during Soviet times, with high rates of interest that quickly became but it became an object of constant concern a problem for borrowers. In 2013, the Interna- as much as of great fascination (Lemon 1998). tional Monetary Fund (IMF) warned Russia Moneymaking schemes encouraged people to regarding its increasing household debt bur- dream of a better future, and they promised new den. Unsecured loans on consumer purchases hope in a destitute economic environment. were growing at a rate of up to 60 percent. Loan Before moving on, it is worth briefl y point- growth in banks was outpacing deposits, which ing out the striking parallels between pyramid the IMF evaluated as being a threat to the fi nan- schemes and Pentecostal Christian movements: cial stability of banks (Reuters 2013). Th is situ- both have proliferated globally in recent de- ation provided fertile ground for moneymaking cades and fl ourished in postsocialist societies; schemes that attracted investors by promising 60 | Leonie Schiff auer to relieve them of their debt burden. Recent to be multilevel marketing companies and thus schemes do not reach the scale of those in the part of a global industry that has developed suc- 1990s, but some of them manage to draw in con- cessfully in Russia. Th is article explores how siderable numbers of people. According to the people are attracted to pyramid schemes in or- Russian Ministry of the Interior, more than 160 der to better understand the nature of specula- Ponzi and pyramid schemes were operated in tion. I am interested in how hopes and dreams, the country in 2014 and resulted in a loss of theories regarding the hidden mechanisms of $46 million for their victims (Zamakhina 2015). the capitalist system, and ideas about the “cap- Until 2016, there was no clear legislation with italist elsewhere” are promoted through specu- regard to pyramid schemes in Russia. Only aft er lative schemes and how they impact local eco- the collapse of these schemes, when the scam nomic realities. had become obvious, could initiators of said My discussion is based on one year of ethno- schemes be legally persecuted (Eremina and Bi- graphic fi eld research conducted in Aga’s district ianova 2015). In 2016, in an attempt to fi ght the center Aginskoe in 2014–2015. Th e fi eldwork I problem of pyramid schemes more eff ectively, a carried out included participant observation in new law was released that declared them illegal. offi ces from where pyramid schemes were op- In 2011, Mavrodi relaunched his MMM erated and at business seminars that were held Ponzi scheme, claiming to off er a system of mu- regularly to promote the schemes and motivate tual help. In Aga, a small district in southeastern investors. Moreover, my fi ndings are based on Siberia with high levels of household indebted- numerous interviews and informal conversa- ness, the scheme became hugely popular before tions with pyramid scheme participants and it collapsed in 2012. Although people remem- their families, as well as with people who had bered the MMM scheme of the 1990s, they were invested money in Ponzi schemes or who were nevertheless ready to risk large sums of money, involved in multilevel marketing. However, I hoping to be among the scheme’s winners. will fi rst discuss in more detail what type of eco- Around the same time, several smaller pyra- nomic phenomenon we are dealing with before mid schemes emerged, pretending to be “com- I move on to my ethnographic case study. panies” (kompanii) and to run serious business projects. Th e representatives of these schemes were either selling services such as insurance Gambling or business? and legal advice, or they were selling products, claiming to be multilevel marketing companies. When risky fi nancial investment takes place What they really off ered, however, was the op- outside the spheres of what is perceived as pro- portunity to earn quick money by recruiting fessional fi nance, it is commonly associated with further participants who all had to make con- gambling. In contrast to fi nance, gambling is siderable investments to join the schemes. Th e understood as an unprofessional and somewhat sale of products or services served to mask the disreputable leisure activity. What takes place in pyramid structure and to make the schemes re- the sphere of business or fi nance, on the other semble business models used in the multilevel hand, is accepted by most people as professional marketing industry. and legitimate. Th is distinction, of course, is In this article, I discuss how one of these constructed. Marieke de Goede (2005), for ex- pyramid scams, a scheme called WIC Holding, ample, shows how during the nineteenth and manifested itself in the Siberian province of Aga. twentieth centuries the notion of fi nance was WIC Holding was among the schemes that were separated from that of gambling as part of the most popular during the time I had spent in Aga proliferation of the capitalist market logic. between the summers of 2014 and 2015, and it Anthropologists of fi nance have challenged belonged to the category of schemes that claim with their studies the widespread view on fi - Dangerous speculation | 61 nance as a set of entirely rational economic ticipants are striving to become professional practices. It has been shown that emotive struc- businesspeople. Th ey begin dressing like busi- tures such as hope shape life in fi nancial markets nesspeople, thinking like businesspeople, and (Miyazaki 2013), that aff ect plays a major role acting like businesspeople. Some of them do so in techniques of fi nancial prediction (Zaloom quite successfully and indeed professionalize in 2009), and that speculation is a crucial logic in their fi eld, which may increase their reputation contemporary capitalism (Bear 2015). Th us, the among colleagues and enable them to increase literature suggests the gamelike, intuitive, and their profi t. emotional nature of various economic practices A few words on the distinction between and makes apparent their similarity to the prac- diff erent moneymaking schemes may help to tices of gambling. clarify the nature of pyramid schemes. Both Anthropologists concerned with gambling, pyramid and Ponzi schemes recruit unsuspect- on the other hand, have shown the calculative ing investors with the promise of high returns. spirit that people may display in order to make Operators claim to run successful business proj- the best bet (Hart 2013: 17; Puri 2015: 466). ects, but in fact early investors are paid with Moreover, it has been shown that gambling the money collected from later investors. Es- may well be perceived as a form of work and as sentially, we are dealing with money-transfer a job, rather than as an instance of speculative schemes that benefi t a small number of people at accumulation (Krige 2011: 5). Th ese studies add the top of the pyramid and result in an eventual further evidence that points to the fl uidity be- loss of money for most investors. Pyramid and tween the categories of business or fi nance and Ponzi schemes may survive for several years, gambling. Th e similarities between gambling but sooner or later, when growth stagnates, they and fi nance become even more apparent when will collapse. In contrast to participants in Ponzi we consider practices such as weather trading schemes,1 participants in pyramid schemes are and spread betting (Loussouarn 2013; Randalls usually aware that their income is dependent 2013). on the recruitment of new investors and that Pyramid schemes are a particularly interest- they themselves must recruit additional inves- ing case because they can be seen as a practice tors, who will themselves recruit new investors, that is situated somewhere in between the com- and so on. Th is may at fi rst sight seem to be mon understandings of gambling and business. an insignifi cant detail, but it is important for Th ey are highly controversial economic phe- two reasons: fi rst, participation in a pyramid nomena and are certainly seen as disreputable scheme requires people to become its marketing and illegitimate by many people. Participants agents and representatives (in contrast to Ponzi are mostly nonprofessionals, that is, people who schemes that only require an investment). And have not received an education in economics second, the multilevel structure resulting from and have little or no experience with compli- the recruitment strategy of pyramid schemes cated fi nancial products and transactions. Al- makes them diffi cult to distinguish from a busi- though they pay money into the scheme in the ness strategy that is legal in most parts of the hope of getting rich quickly, pyramid scheme world: multilevel marketing (MLM). participants do not understand their activity to Because of the structural similarity between be gambling but rather see it as work. Indeed, MLM and pyramid schemes, MLM companies the profi tability of their investment depends such as Amway and Herbalife are frequently on their success in recruiting further partici- accused of operating pyramid schemes (Keep pants, which is what they conceive of as their and Vander Nat 2014; Nocera 2015). Likewise, job. Th ey go about their activities not in demar- pyramid scheme operators oft en claim to be cated zones of gambling such as race courses running perfectly legal MLM enterprises (SEC or casinos but in offi ce spaces. Moreover, par- 2013). As I have indicated above, several of the 62 | Leonie Schiff auer pyramid schemes I investigated in Russia were A pyramid scheme in Aga off ering similar products as MLM companies, such as household appliances and personal care WIC Holding is a pyramid scheme headed by items, in order to enhance the impression that a charismatic man called Arakadii Sharov. On they were legitimate forms of business. More- his personal homepage, Sharov presents himself over, the multilayered pyramid structure, their as a professional businessman and an expert in promises, their methods of recruitment, and the multilevel marketing (setevoi biznes). According logics with which MLM companies and pyra- to his own account, he worked for many com- mid schemes operate appear very similar, which panies and cooperated with various important makes it diffi cult to distinguish them from each businesspeople (none of whom he names) be- other. As has been observed also in South Af- fore developing WIC Holding. In 2007, he was rica (Krige 2012: 71), the same people may be asked by one of his acquaintances, a “success- involved in both types of activity. ful businessman,” to consult him in founding a Th e comparison between pyramid schemes, multilevel marketing project of “a new kind.” As Ponzi schemes, and MLM reveals with partic- he writes on his homepage, this project was “a ular clarity the instability of categories such as big capital group of the closed type, which for business and gambling: whereas Ponzi schemes the fi rst time in the history of multilevel mar- resemble what most people would describe as keting decided to invest money in the founda- gambling (if defi ned as wagering money at tion of a multilevel marketing company. Th e high risk with no or little agency regarding the investors explained their decision in terms of profi tability of the investment), MLM is recog- the great profi tability and glorious future of nized in most kinds of legislation as a form of such a project.” Sharov accepted his acquain- business that is based on a particular market- tance’s proposal and helped to set up the proj- ing strategy. Pyramid schemes are remarkable ect that would become WIC Holding. Sharov’s socioeconomic phenomena because they are homepage includes several pictures of himself similar to both MLM and Ponzi schemes. Th e in business suits and in offi ce environments, a fact that pyramid schemes involve a hoax makes depiction of his luxurious lifestyle, and a list of it even more diffi cult to discuss them either tips for people who wish to become as success- in terms of business or in terms of gambling. ful as he is. Th ey pretend to be stable enterprises that mar- WIC Holding has offi ces across Russia, from ket certain goods or services while veiling the where the scheme is operated. Its representa- fact that they are high-risk investment schemes tives—the people who work in these offi ces— that may collapse at any time. Participants try to claim that the holding is made up of several establish them as systems that off er acceptable companies that operate a number of profi table fi nancial products, sometimes pretending that business projects, among them a Christmas the scheme is some sort of alternative bank that market in Germany, a nightclub on Cyprus, an is able to off er people very high percentages on underwear sales business, and the sale of health- their money. Th us, an investigation of pyramid and beauty-related products. Th eir claims are schemes enables us to see how ordinary people based on the information they receive from preach the logic of fi nance, the advantage of Sharov and several other top operators online investment, and the benefi ts of speculation in through an internal section of the WIC Hold- rural Siberia. Th e following ethnography will ing homepage, through educational videos dis- show how participants attempt to make them- tributed by WIC Holding, via Skype, or at the selves into businesspeople and how they try to business seminars that WIC Holding organizes lend legitimacy to a fi nancial system that they in several Russian cities or on Cyprus, where its have been persuaded to believe in. headquarters are located. Dangerous speculation | 63

Everyone who wishes to do so can become a opportunities that they believed WIC Holding representative of WIC Holding. Neither a partic- to be off ering. ular educational background nor a certain kind Aft er the initial investment, there is a spec- of professional experience is required. People of trum of possible involvement with WIC Holding. every age, ethnicity, and gender are welcome. Partners become representatives of the scheme Th e scheme works inclusively because it grows as soon as they start advertising WIC Holding through everyone who joins it and because ev- actively, but in many cases they stop inviting eryone’s attempt to recruit more people benefi ts further investors aft er an initial surge of enthu- its proliferation. In order to participate in the siasm. Either they cannot fi nd new investors, or scheme, people have to become its “partners” they realize how damaging their activity is to (partnery) and to buy shares for a minimum their relations with friends and relatives. Some amount of 60,000 rubles ($962). Investors are start having doubts about the scheme’s integrity promised enormous returns on their payment, and its promises aft er a while and do not want the amount of which depends on the number to be responsible for attracting further people of investors they are then able to recruit.2 WIC to the scheme. Th us, by far not all investors be- Holding also claims to be selling products that come its long-term representatives. Mostly, only resemble those of most MLM companies: nu- those partners who manage to recruit people tritional supplements, cleaning materials, and with some success keep actively recruiting fur- cosmetic articles. Partners receive a box of these ther investors, and it is only these partners who products in return for their initial payment that perceive their involvement as a profession. appears to be worth no more than 1,000 rubles Th ere was a lot of criticism surrounding the ($16). WIC Holding suggests that this gives scheme, and angry investors kept calling and them the opportunity not only to make money seeing those who had recruited them into the through their investment but also to profi t from scheme, demanding their investment to be re- the sale of these products. turned. Th is was impossible, of course, as the WIC Holding was introduced to Aginskoe in latter were not in control of the money, which 2010 by a woman now in her fi ft ies, Ianzhima, had been paid directly to WIC Holding. On the and aft er about a year it was actively supported other hand, there was a lot of uncertainty sur- also by her sister Tsyregma. Both Ianzhima and rounding the scheme, and many people were not Tsyregma are locals who grew up in the coun- sure what to think of it. Everyone knew several tryside near Aginskoe. Hundreds of people in people who had lost money in this scheme or in the town and the surrounding district have paid previous pyramid and Ponzi schemes, but there money into the scheme, but apart from the two were also a few people who had made money or sisters and a few other people who joined early, at least claimed to have made money.3 As most none of the partners have received a signifi cant people in Aginskoe were highly skeptical of the amount of money. WIC Holding blames the de- schemes, recruitment had become very diffi cult lay in payment on the economic crisis following for WIC Holding representatives at the time of the sanctions imposed on Russia aft er its mili- my research. tary intervention in Ukraine or on the fact that Th e WIC Holding offi ce in Aginskoe is lo- people have not been working hard enough to cated in the town’s center, on the top fl oor of recruit more participants. Some of the partners one of its few two-story buildings, which has whom I met during the time of my research had the character of a market, as most of its space is given up the hope that they would ever see the rented by traders selling shoes and clothes that invested money again; others were still hoping they import from China or from Russian cities. that they would receive the expected profi t, and Th e building’s offi ce space was also rented by those working actively fervently defended the Amway, an MLM company. Th e WIC Holding 64 | Leonie Schiff auer offi ce is equipped with four small desks, a few they decided to engage in a similar but more chairs grouped around the desks, a big televi- risky enterprise that promised to earn them the sion screen, and a shelf on which the cosmetic money they were hoping for. articles, nutritional supplements, and cleaners By becoming representatives of WIC Hold- it pretends to be marketing are displayed. Th e ing, they immersed themselves deeper into their walls are decorated with pictures of Arkadii fantasies of the good life, increasingly disregard- Sharov and of partners from other parts of Rus- ing the fl aws of the scheme. Th us, they began sia smiling under a shower of golden confetti. clinging on to something that was actually an Th ere are also pictures with local partners and obstacle to their well-being—a condition that their “sponsors”—the people who recruited Lauren Berlant (2011) has described as “cruel them into the scheme and whom they accept as optimism.” Berlant reminds us that sentiments their teachers and supporters. that project the future in a positive light may ac- Th e offi ce was set up on Ianzhima’s initiative tually be quite destructive in their eff ect. Caught and is now headed by Tsyregma. Ianzhima has in fantasy, we might be trapped in practices that moved to Chita, a city two hundred kilometers lead away from what we are longing for. Th at northwest of Aginskoe, and is working from we do so is not irrational or erroneous, because the WIC Holding offi ce located at the city’s out- we may fi nd comfort within these emotions. By skirts. Th e partners who come to the offi ce in maintaining their attachment to the fantasy of Aginskoe are mainly Buryat women aged be- the good life, most WIC Holding partners were tween 30 and 60.4 Some of them had been work- drawn deeper into debt along with the people ing for WIC Holding for two or three years in whom they encouraged to register and thus 2014, while others had joined in only recently. counteracted their own material interest while Two of them had given up their jobs in the lo- fi nding comfort in their vision. cal administration in order to devote all of their time to WIC Holding, while others were pen- sioners or mothers who wished to earn a bit of Staging success extra money to support their families. Th ese women and the three men who fre- WIC Holding promotes two main ways of out- quented the offi ce believed, or at least they pre- reach to the public for the purpose of recruit- tended to do so quite successfully, that they were ment. First, there is the organization of seminars involved in MLM, an entirely legal activity, and, by local teams of active partners, and second like the representatives of MLM companies, there are personal meetings with potentially in- they called themselves seteviki (networkers). terested investors. I will focus on these outreach Several of them had been working for Amway techniques in order. Th e seminars are remark- before they joined WIC Holding. Th us, they had able spectacles that are performed to create the learned the narratives and techniques of MLM impression that a lot of money can be made through this American multinational company through the scheme. Anna Tsing (2005) argues that uses a direct selling approach to market that drama is essential in speculative enterprise. its cleaning, personal care, and health-related Her argument is based on the case of a major products. None of them managed to success- gold mining scandal triggered by a Canadian fully earn money as Amway distributors and company that announced the discovery of gold thus decided to move on to a new project where, in the Indonesian rainforest. Using this exam- so they thought, involvement would be more ple, Tsing shows that charismatic performance profi table. Th ese individuals exemplify the con- and the conjuring of mystery were crucial for fl ation of business and gambling with particu- the attraction of international fi nance capi- lar clarity. Because of their frustration with a tal. Essentially, drama allowed for the creation business project that did not work out for them, of what she calls an “economy of appearance.” Dangerous speculation | 65

Interestingly, in the case of pyramid schemes, ready more important than both the oil and gas drama is enacted in an almost literal sense as industry and the telecommunications industry. the companies rent venues with stages for their Th e second speaker, an inexperienced partner performances such as theaters and music halls. who had joined the scheme a few months before Let me now describe the procedure of one the event, had the task of providing some basic of the WIC Holding seminars that I attended facts about WIC Holding, which she herself had in August 2014 in Aga, in order to give an im- only learned recently. Having put a great deal of pression of their dramaturgy. On the stage of emphasis on the fact that she was representing a local school’s auditorium, a table with WIC an “international company,” she continued with Holding products had been set up: nutritional explanations about the nature of the scheme: supplements, cleaning materials, cosmetic articles, and tea, all arranged with great care. A Why is it a holding? Because we are deal- big screen and a projector had been installed ing with several subsidiaries and the com- to show WIC Holding’s statistics, pictures, and pany was founded as a hypermarket. What videos. Th e partners had all gotten dressed up, is a hypermarket? It is this: you come to wearing suits and elegant dresses. Around 20 a shop and you buy bread and chocolates guests were present, and they consisted mainly and fruits and even tableware, socks and of the partners’ female acquaintances and rela- so on in one place. You go to one shop and tives, who, in their majority, were clearly more buy it all. Th is is very comfortable and skeptical than enthusiastic. In several cases, as I profi table. So our company is a holding. learned later, their attendance was a favor to the person who had invited them to the seminar, Th e third speaker presented the products. rather than a demonstration of serious interest It was a woman in her mid-thirties who, like in the scheme. Some reported that their rela- the previous speaker, was a newcomer to the tives had exerted considerable pressure to make scheme. From time to time, she forgot what she them attend the seminar. wanted to say next and had to be reminded by Th e seven partners who had organized the her colleagues. Her objective was to emphasize event took turns presenting WIC Holding and the extraordinary and almost magical qualities its alleged opportunities. Th eir performance of the products. Th e tea, so she claimed, was was well rehearsed, but they clearly had various made according to the recipe of a renowned levels of experience. Th ree of the speakers had healer, and it had been proven to cure all pos- worked for WIC Holding for several years or sible illnesses. Th e washing paste was widely had previously been involved in MLM and had consumed because, in contrast to washing pow- already practiced similar performances. For the der, it was suited also for people suff ering from others, it was their fi rst time speaking in front of allergies and it would remove all stains without an audience, and they were more insecure than any eff ort. And the sale of underwear would their colleagues. Every new speaker was intro- certainly fl ourish in the future for the evident duced by the previous one and praised for their reason that, as everyone wears it, underwear is a professional and personal qualities. Th eir walk highly demanded product. onto stage was accompanied by loud applause Th e demonstration of the products was fol- from the other partners, supported by pop mu- lowed by a presentation of the marketing plan, sic, and, occasionally, reluctant applause from which was argued to be much better than that of the audience. other MLM companies because it would lead to Th e fi rst speaker, one of the experienced part- greater riches. Th e speaker, one of the two male ners, gave a ceremonial introductory speech, partners present at the event, showed slides with confi dently claiming that WIC Holding was part the income that some of the successful partners of a rapidly growing MLM industry that was al- in other parts of Russia earned every year, and 66 | Leonie Schiff auer pointed to Ianzhima’s and Tsyregma’s “salaries,” performance of others, either online or at the asking the audience where else in Aginskoe seminars they have attended. However, it is such money could be made. People would be important to note that they do not understand skeptical about WIC Holding just because they themselves as actors. For them, it is neither a were not capable of imagining that they them- show nor a fantasy they are staging, but reality. selves could become rich. In the future, how- Th e seminar I have described here is an ever, they would be grateful to the partners for event of outreach, but at the same time it is an making them understand the opportunities of important confession of faith and adherence to the scheme—just like one of the most successful a certain set of ideas. By reaching out with the partners from the region: aim of converting others, the scheme’s representatives publicly demonstrate their belonging to Zhargalma Iurevna, one of Buriatiia’s ce- the scheme and repeat their convictions in a rit- lebrities, a woman who worked all her life ualized manner, as the seminars always contain trading meat on the market, today earns the same elements and information. Th is can an average of one million seven hundred a be seen as a form of proselytizing, the signifi - month. . . . She told us how her sponsors, cance of which lies not only in its outcome (i.e., Marina and Boris, chased her in the street whether or not more people can be convinced and caught her in order to make her un- to join the scheme) but also in the practice it- derstand the advantages of the company self (cf. Coleman 2003: 17). Th e performance and the opportunities it off ers. Today, she can be seen as an important way of confi rming is grateful to them because they really belief by acting as part of a new community made her grasp the advantages of working and by preaching what they have accepted as with our company. truth. Th is underlines the important fact that it is not merely calculative reason and the desire Th e seminar was closed with the screening of for big money that draws people into pyramid short videos of the WIC Holding summit on schemes, but so does the prospect of becoming Cyprus in order to leave people with a powerful part of a spiritual community (cf. Cahn 2011, impression of the glamorous corporate culture: who made the same point with regard to MLM Arkadii Sharov arriving in a Mercedes, partners companies). sipping cocktails at a swimming pool or having fun onboard a motorboat, and top partners proudly displaying the awards they received for Imagining wealth their success. WIC Holding and other pyramid schemes Speculation, Laura Bear and colleagues (2015) use performance in order to make people be- argue, must be distinguished from calculative lieve in the profi tability of their business pro- reason because it “conjures value and channels posal. Staging success is crucial for giving the the invisible and unknowable.” As speculation schemes the appearance of profi table enter- implies the anticipation of uncertain futures, prises. Notably, the partners who are represent- imagination lies at its heart (cf. Appadurai 2012). ing WIC Holding on stage play the roles of the Above, we have seen that narratives about possi- businesspeople whom they are trying to emulate ble wealth are a key part of WIC Holding’s per- in every regard: they dress like them, represent formances. Th e audience is invited to identify what they believe to be a legitimate company, with representatives of the scheme who have advertise products, promote fi nancial products, managed to lift themselves out of poverty and and calculate potential gains. Th rough their per- is encouraged to dream about a better future. formance, they cultivate entrepreneurial dispo- In what follows, I want to take a closer look at sitions that they have learned by watching the the everyday work of WIC Holding partners in Dangerous speculation | 67 order to explore the role and the nature of their ing the scheme during the time of my research, imagination in greater depth. told me that she could not understand why peo- WIC Holding partners are encouraged by ple were so reluctant to work for the “company.” their sponsors and uplines5 to work according Th ey had debt but did nothing to improve their to a structured daily offi ce routine, the main ob- situation. According to her rationale, people jective of which is to make further people in- simply did not understand the great opportu- vest money into the scheme. Th e morning is nities that investments off ered them. She at- reserved for making phone calls. Th ese calls are tributed this ignorance to the fact that people in made with the purpose of fi nding people who Aga had little fi nancial literacy. Explaining the will agree to come to the offi ce and to listen to marketing plan, in her opinion, leaves no doubt their off er. Th is is as diffi cult as fi nding people about the wealth that an investment guarantees, willing to come and listen to the seminars. Peo- and she understood her jobs as a way of helping ple know about the scheme, they have been to people to deal with their fi nancial concerns. the offi ce and to the seminars organized by WIC Whenever she managed to attract guests to Holding, and they have either already registered the offi ce, Tsyregma fi rst encouraged them to or turned down the off er. Th erefore, the part- imagine what they would buy if they had a lot ners also travel to other parts of the district and of money. Th en she started making opaque cal- beyond in order to recruit more people. WIC culations on a small calculator and on a piece of Holding advises organizing meetings only in paper in order to demonstrate how this money the offi ce, as any other approach would make an could be earned. Her calculations were confus- unprofessional impression on potential recruits. ing even to herself. She spoke about numbers In the aft ernoon, the “rendezvous” (randevu) of people who could be recruited, sums that should take place. Th is is the meeting with those needed to be invested, percentages on these whom the partners have managed to persuade sums that would be paid back aft er a certain to come to the offi ce. An exact plan exists for amount of time, and WIC Holding’s bonus pro- how guests and potential investors should be gram. She added and multiplied numbers, cal- greeted, where they should be seated, and in culated percentages, converted sums from euros what order the information about WIC Holding into rubles and back until she ended somewhere should be communicated to them. Ideally, such with the conclusion that the fi gure she had be- a meeting should end with the guest’s registra- fore her was the amount of money that could be tion and a payment into the scheme. earned, exclaiming with shining eyes: “Imagine, Th e information given during the rendez- how much money . . .” vous is essentially the same as the information Th e marketing plan is used to lend an aura of given during the seminars: rags-to-riches nar- scientifi c rationality to a narrative that sounds ratives, a presentation of the products, and a like a fairy tale. It is used as a tool designed to demonstration of the marketing plan. In order represent calculative reason as much as it is used for the rendezvous to be successful—that is, to as a tool to trigger people’s fantasies and lead literally establish the basis for a love relationship them into a world of imagination. Speculation between the potential partner and the scheme— has been compared to divination and prophecy the partners must encourage their guests to because all these practices aim at dealing with imagine possible rewards and possible futures. future uncertainty (Bear et al. 2015). Th e cru- Th e marketing plan, an alleged instrument of cial diff erence that scholars see, however, is that calculation, is used as a key device for this pur- speculation always exists alongside the “formal pose and thought of as a tool for demonstrating knowledge practices of modernity” (388) such the opportunities that the scheme off ers. as calculation and risk assessment. Pyramid Tsyregma, the most experienced among the schemes such as WIC Holding show this very WIC Holding partners who were actively push- clearly: while making calculations, Tsyregma in- 68 | Leonie Schiff auer creasingly left behind the realm of the probable connecting to capitalism. With particular clarity, (“if you manage to fi nd three people and earn this emerges from a story that Tsyregma once a certain provision”) and entered the realm of told me: the possible (“as soon as your three recruits will each have recruited another three people, you Th ere is a group of capitalists, very rich will earn the fi rst bonus payments”), thereby and very powerful, who are in control of increasingly disregarding social realities. Th e the world’s capital. No one knows exactly more speculative her account became, the fur- who they are, but what is known is that ther behind she left the realm of business and they have their headquarters on Cyprus the more she got into the realm of gambling. [this is also where WIC Holding is regis- Narratives of future wealth and calculative tered and where seminars for the top lead- devices such as marketing plans show that tem- ers take place]. Th is group is called the poral imagination features prominently in pyra- closed group of capital (zakrytaia gruppa mid schemes. I want to emphasize, however, that kapitala). Th e capitalists who make up the spatial imagination, which contains ideas about group employ several experts to work for how global capitalism works and how places are them. Among these experts are adminis- interconnected through fi nancial transactions, tration staff , technicians, economists, and is equally important. Spatial imagination serves also seteviki. One of the seteviki working to lend power to the idea that investment will for the group is Arkadii Sharov. And do indeed pay off . you know why WIC is a Russian com- WIC Holding, like all other pyramid schemes I pany? Because Arkadii Sharov is Russian. encountered in Aga, emphasizes its internationality during all of its outreach activities. Th e Aft er the fi nancial crisis in 2008, she went on to partners in Aga frequently highlighted the fact explain, the group of capitalists understood that that their “company” is registered in Europe, multilevel marketing (setevoi biznes) would be that it was about to expand into the Chinese mar- the business of the future. Th e crisis had shown ket, and that some of its business operations, that the “traditional business” (traditsionnyi such as the Christmas markets, are conducted biznes) was no longer profi table. In contrast, in wealthy Western countries. Th e names of MLM companies were proliferating even during WIC Holding’s product lines are mostly English the crisis and therefore proved that the network (e.g., WIC Beauty or EasyLife), and calculations business model was a promising one. are made in euros. Th us, the emphasis on global According to this narrative, the secret source connections is part of the marketing strategy of capital can be accessed by ordinary people of the schemes. Here lies an interesting parallel through the pyramid scheme. WIC Holding’s to the world of professional fi nance. As Karen charismatic front fi gure is imagined as a mid- Ho has shown, global imaginations are highly dleman between the people in Aga and the pow- prevalent in Wall Street investment bankers’ erful people running the capitalist economy. discourses. Claims of the internationality of Th e scheme is imagined as an immediate and business are a key marketing tool through which direct point of access to the sources of capitalist capitalist power is expressed and perpetuated, wealth. Ideas about spatial connections between and they are “integral to the normative process pyramid schemes and powerful centers of global of conducting business in an investment bank” fi nance are not particular to WIC Holding, but a (2005: 74). For WIC Holding representatives in comparison to other studies shows that they are Aga, the global speak is not merely a market- a prominent feature of pyramid schemes more ing strategy or a way of lending authority to the generally. John Cox, for example, discusses a information they distribute; it is also important pyramid scheme on Papua New Guinea that as a means of engaging with, understanding, and invokes the London Stock Exchange and the Dangerous speculation | 69

World Bank, that is, places where many local Th e idea of a better future does not remain people imagine great wealth to originate. Like an abstract goal; the imaginative space created in Aga, this scheme spread narratives that “po- by the dream of wealth is fi lled with specifi c sitioned the scam as a mediator between PNG ideas. Potential recruits are asked to imagine investors and international institutions” (2016: what exactly they will buy with the money they 69). Th us, pyramid schemes connect private will earn, whether it will be a house, a car, or hopes to the imagination of new spatial connec- a journey. Th ey are asked to think about their tions that link various parts of the world to the dreams in every detail, for example, what type centers of global fi nancial power. of car they want, which brand, and what color. Calculations are made that aim to demonstrate with scientifi c rationality what will happen in Conclusion the future. Numbers are used to support the idea that wealth is actually achievable and that WIC Holding managed to turn hundreds of it is achievable within a few months. Imagina- people across Russia into its representatives and tion, I have argued, is important to WIC Hold- to attract considerable investments from thou- ing’s mythmaking project both in a temporal sands.6 Th is was achieved by using techniques of and in a spatial sense. Ideas about capitalism’s make-believe aimed at encouraging speculative hidden mechanisms link the pyramid scheme thinking. By fueling hopes of a better future, to sources of fi nancial power, which encourages WIC Holding drew people into highly contested the idea that the desired money can become economic activities that, for the vast majority, accessible by establishing transnational connec- did not lead to the fulfi llment of their dreams tions to fi nancial centers. Th us, attention is di- but instead increased the fi nancial diffi culties verted from where the money really comes from they faced. (the investor’s friends and relatives), and the Performance, as I have shown, is important pyramid scheme is rendered a moral enterprise. when conjuring ideas of wealth. Th e stage pro- Pyramid schemes can successfully claim that vides an opportunity to present WIC Holding as they are a legal and legitimate type of business, a modern capitalist enterprise and as a system rather than a form of gambling, by emulating that enables people in rural Siberia to rise from capitalist aesthetics, using capitalist rhetoric, rags to riches. Th e idea that it is possible for ev- and, of course, pretending to be a form of MLM. eryone to join the scheme, and thereby escape My research suggests that their advocates’ strat- poverty, is compelling to people—especially if egies of making people believe in the profi t- they are experiencing or have experienced fi - ability of investment work particularly well in nancial diffi culties. Rags-to-riches narratives recently capitalist environments where people are presented in order to emphasize that other have little experience with fi nancial products, people have achieved precisely what is promised speculative thinking, and individualist-aspira- by WIC Holding. And the way of getting there tional ambitions, but where they see the need seems easy: people need to take a bank loan, pay to adapt to new capitalist realities and wish to the money into the scheme, and fi nd others who participate in capitalist modernity. will do the same. By providing a recipe for suc- Pyramid schemes are fascinating social phe- cess, pyramid schemes not only conjure dream- nomena because they refl ect the capitalist logic worlds but also conceptually bridge the gap that systemic growth is indefi nite. Th e latter between present and future, reality and dream. concept works as an illusion that is necessary to Performance, I have argued, is crucial both in sustain the idea that all participants can profi t order to make people believe in the scheme and from the system. In fact, growth is limited, in order to reinforce their belief by communi- which means that anyone can be successful but cating the scheme’s core ideas to others. not everyone will be successful. Th erefore, in or- 70 | Leonie Schiff auer der to fuel the proliferation of the schemes, and that they can simply invest money and then wait capitalism more generally, the idea that growth for their interest to accrue. is limited must be concealed. Th e belief in the 3. I noticed repeatedly that active representatives system needs to be strengthened by the rheto- of the scheme made it sound as if they were ric of possibility while the logic of probability is earning a lot of money (in order to convince others to join the scheme), although this was dangerous to the success of the scheme. Like in not the case. capitalism, the cultivation of hopes and dreams 4. Th e Buryats are an ethnic minority who, in is crucial to the proliferation of the schemes their majority, inhabit the regions around Lake because every attempt to aspire to the good life Baikal. Aga is a formerly autonomous Buryat sustains the system. district with a mixed Buryat and Russian pop- ulation. About 70 percent of the inhabitants of the town of Aginskoe are Buryat. Acknowledgments 5. All those who are above a representative’s genealogy, including their sponsor. I want to thank Matteo Benussi, Elizabeth Turk, 6. As there are no offi cial numbers, these are es- and Caroline Humphrey for numerous discus- timations based on my informants’ accounts sions on the topic and for their valuable com- about the size of seminars they went to, videos ments on this article. Moreover, I wish to thank of seminars from diff erent parts of Russia and the two anonymous reviewers of Focaal for their Cyprus, and the sizes of WIC Holding social media communities. very helpful suggestions.

Leonie Schiff auer holds a master’s degree in an- References thropology and Slavic studies from the Univer- sity of Heidelberg and recently completed her Appadurai, Arjun. 2012. “Th e spirit of calculation.” Cambridge Journal of Anthropology 30 (1): 3–17. PhD in the Department of Social Anthropology Bear, Laura. 2015. “Capitalist divination: Popularist at the University of Cambridge. Her main re- speculators and technologies of imagination on search interests include Siberia, economic an- the Hooghly River.” Comparative Studies of South thropology, globalization, and the anthropology Asia, Africa and the Middle East 35 (3): 408–423. of fi nance. Bear, Laura, Ritu Birla, and Stine Puri. 2015. E-mail: leonie.schiff [email protected] “Speculation: Futures and capitalism in India.” Comparative Studies of South Asia, Africa and the Middle East 35 (3): 387–391. Notes Berlant, Lauren. 2011. Cruel optimism. Durham, NC: Duke University Press. 1. Th e term “Ponzi scheme” goes back to Charles Borenstein, Eliot 1999. “Public off erings: MMM Ponzi, who in 1919 initiated a fraudulent and the marketing of melodrama.” In Consuming scheme in the United States by promising in- Russia: Popular culture, sex, and society since vestors that they would make massive profi ts Gorbachev, ed. Adele M. Barker, 49–75. Durham, by purchasing international reply coupons and NC: Duke University Press. redeeming them in the United States for postage Cahn, Peter S. 2011. Direct sales and direct faith in stamps. Ponzi managed to deceive his investors Latin America. New York: Palgrave Macmillan. by paying early ones with the money he col- Cassidy, Rebecca, Andrea Pisac, and Claire Lous- lected from later ones while pocketing millions souarn, eds. 2013. Qualitative research in gam- of dollars himself before his scheme collapsed. bling: Exploring the production and consumption 2. Profi t depends on recruiting participants into of risk. New York: Routledge. the scheme. Th is, however, is not always made Coleman, Simon 2003. “Continuous conversion? entirely clear when participants advertise the Th e rhetoric, practice, and rhetorical practice scheme. Th ey sometimes make people believe of charismatic Protestant conversion.” In Th e Dangerous speculation | 71

anthropology of religious conversion, ed. Andrew Nocera, Joe. 2015. “Th e pyramid scheme problem.” Buckser and Stephen D. Glazier, 15–28. Oxford: New York Times, 15 September. Rowman & Littlefi eld. Pelkmans, Mathijs 2009. “Introduction: Post-Soviet Comaroff , Jean, and John Comaroff 2001. “Millennial space and the unexpected turns of religious life.” capitalism: First thoughts on a second coming.” In In Conversion aft er socialism: Disruptions, mod- Millennial capitalism and the culture of neoliberal- ernisms, and the technologies of faith, ed. Mathijs ism, ed. Jean Comaroff and John Comaroff , 1–56. Pelkmans, 1–16. New York: Berghahn Books. Durham, NC: Duke University Press. Pesmen, Dale. 2000. Russia and soul: An exploration. Cox, John 2016. “Value and the art of deception: Ithaca, NY: Cornell University Press. Public morality in a Papua New Guinean Ponzi Puri, Stine S. 2015. “Betting on performed futures: scheme.” In Anthropologies of value: Cultures of Predictive procedures at Delhi Racecourse.” accumulation across the Global North and South, Comparative Studies of South Asia, Africa and the ed. Fernando Angosto-Ferrandez and Geir H. Middle East 35 (3): 466–480. Presterudstuen, 51–74. London: Pluto Press. Randalls, Samuel 2013. “Weather trading in Lon- De Goede, Marieke. 2005. Virtue, fortune and faith: don: Distinguishing fi nance from gambling.” In A genealogy of fi nance. Minneapolis: University Cassidy et al. 2013: 187–201. of Minnesota Press. Reuters. 2013. “IMF warns Russia on increasing Eremina, Anna, and Nataliia Biianova. 2015. household debt burden.” 22 October. https:// “Sergei Mavrodi snova predlagaet rossiianam www.reuters.com/article/russia-imf-banking/ fantasticheskie protsenty” [Sergei Mavrodi again imf-warns-russia-on-increasing-household- off ers Russians a fantastic interest]. Vedomosti, debt-burden-idUSL5N0IC2GB20131022. 10 February. Rogers, Douglas. 2005. “Moonshine, money, and the Hart, Keith 2013. “Making money with money: politics of liquidity in rural Russia.” American Refl ections of a betting man.” In Cassidy et al. Ethnologist 32 (1): 63–81. 2013: 15–27. Rona-Tas, Akos, and Alya Guseva. 2014. Plastic Ho, Karen 2005. “Situating global capitalisms: A money: Constructing markets for credit cards in view from Wall Street investment banks.” Cul- eight postcommunist countries. Stanford, CA: tural Anthropology 20 (1): 68–96. Stanford University Press. Keep, William, and Peter Vander Nat. 2014. “Mul- SEC (US Securities and Exchange Commission). tilevel marketing and pyramid schemes in the 2013. “Beware of pyramid schemes posing as United States.” Journal of Historical Research in multi-level marketing programs.” 1 October. Marketing 6 (2): 188–210. https://www.sec.gov/oiea/investor-alerts-bulle Krige, Detlev. 2011. “‘We are running for a living’: tins/investor-alerts-ia_pyramidhtm.html. Work, leisure and speculative accumulation in an Smirnova, Julia. 2012. “Dreistes Comeback des Fi- underground numbers lottery in Johannesburg.” nanzpyramiden-Moguls” [Brilliant comeback of African Studies 70 (1): 3–24. the fi nancial pyramid mogul]. Die Welt, 25 April. Krige, Detlev. 2012. “Fields of dreams, fi elds of Tsing, Anna L. 2005. Friction: An ethnography of schemes: Ponzi fi nance and multi-level market- global connection. Princeton, NJ: Princeton ing in South Africa.” Africa 82 (1): 69–92. University Press. Ledeneva, Alena V. 1998. Russia’s economy of Verdery, Katherine 1996. “Faith, hope and Caritas in favours: Blat, networking, and informal exchange. the land of the pyramids, Romania, 1990–1994.” Cambridge: Cambridge University Press. In What was socialism, and what comes next? Lemon, Alaina. 1998. “‘Your eyes are green like dol- ed. Katherine Verdery, 168–203. Princeton, NJ: lars’: Counterfeit cash, national substance, and Princeton University Press. currency apartheid in 1990s Russia.” Cultural Zaloom, Caitlin. 2009. “How to read the future? Anthropology 13 (1): 22–55. Th e yield curve, aff ect, and fi nancial prediction.” Loussouarn, Claire 2013. “Spread betting and the Public Culture 21 (2): 245–268. City of London.” In Cassidy et al. 2013: 233–250. Zamakhina, Tat’iana. 2015. “Za sozdanie fi nansovoi Miyazaki, Hirokazu. 2013. Arbitraging Japan: piramidy oshtrafuiut na million” [For the Dreams of capitalism at the end of fi nance. Berke- creation of a fi nancial pyramid will be fi ned one ley: University of California Press. million]. Rossiskaia Gazeta, 2 December.