I had a wonderful closing lunch with my host in Tirana on Friday. He took me to a very posh but very traditional restaurant in a modern building just off a small lake which is the centerpiece of the only proper large park in the city. We went for a nice, if quite hot and humid walk along the lakeshore before heading back for our reservation.
Despite being in a twelve story modern block of flats, the restaurant was decorated so as to look like a country tavern, with bare wood planks for walls, millstones in the front where they ground the flour for the dense brown bread that came wrapped in a simple kitchen towel, a wood stove in the corner and tables with drawers where you found your cutlery. To start, they gave us each a glass of rose pedal cordial. My host did the ordering and there soon followed a platter of local cheese – fresh, almost sparkly white cow’s cheese, and hard cheeses infused one with herbs, one with berries, and one hard aged and almost unyielding to a knife. The cheese came with a dark orange berry compote and an almost purple honey. Then came the starters: fried zucchini flowers stuffed with herbed sour cream, and a salad with apples and homemade partially cured sausage. The mains were spectacular: goat – really the spine of a goat – roasted to within a second of dissolution and with dark crackling bits of fat, with simple polenta drizzled with olive oil, and homemade sausage with a berry reduction and roasted vegetables. I had a fresh simple red wine, a glass with the starters and another with the mains; my companion stuck to sparkling water. For dessert, the restaurant made their own ice cream in a hand-churn while we ate our mains, served dusted with dried berries that reminded me of Saskatoon berries in Canada, and then a sweet corn meal wet custard that came with a bird’s nest pastry with fermented mountain berries on top.
But the conversation was what made the afternoon. My host gave me an interpretive history of Albania over the past twenty years, including his place and his family’s place within it. It’s not a history that most of us can understand: in 1997 the country dissolved into anarchy, most people arming up with the assistance of the government opening up the army’s arsenals, but before that the dissolution of a closed, internally self-coherent communist system more or less akin to what North Korea experiences today. One of the most puzzling things my host said was that the anarchy that broke out in 1997 – people firing into the air every evening to demonstrate to their neighbors that they were armed, multiple factions clearly exploiting the situation but no one capable of understanding which gang was really in control, and then NATO coming in and restoring order – was actually probably not as traumatic as the slightly less violent but much more psychologically disruptive end of the dictatorship in 1990. I asked how his parents dealt with the civil breakdown in 1997 and he said it was terrible, but they were on some level prepared because they had already had all of their notions of reality shattered in 1990; having them shattered again wasn’t actually so horrible as the first time around.
I was given a quick history of the history of the pyramid schemes. Albania’s communist dictatorship fell at the same time that the Yugoslavian civil was in full swing, and Serbia was under a fairly heavy sanctions regime which banned sales of arms, oil, and other war materiel to combatants. Albania shares a border with Kosovo, and enterprising businessmen – with the connivance of the new post-communist government, desperate for foreign currency and trade – realized that they could import into Albania all sorts of things for the war effort, and then ship it across the lightly guarded Kosovo border. They set up financing companies which offered very attractive interest rates for people willing to invest in the schemes; the money would then purchase, say, diesel in the open market, smuggle it into Kosovo and Serbia, and resell it to combatants at ridiculous markups. In those early days, they weren’t Ponzi schemes at all – the returns available from smuggling more than paid for the 3% or 4% per month (yes, that’s about 50% returns annualized) that investors were paid for use of their money. Since the banking system was rickety at best and associated with the discredited former regime, these investment vehicles quickly became much more popular than traditional savings banks – indeed, deposits were drained to go into them.
As time went on and the conflict wound down – the Dayton Accords were signed and the ceasefire took shape in late 1995 – the opportunities to actually make the money that supported the schemes started to dry up. But the schemes were popular, and people still wanted to invest – so the operators simply converted them to Ponzi schemes. Smugglers, after all, aren’t fussy about the moral or legal differences between legitimately financing illegal operations versus running a patently illegitimate fraud. Returns on existing accounts were paid with the incoming deposits from new investors. Some observers – for instance, the then-head of the central bank – warned that this was a pyramid scheme and would soon collapse, but the government countered these warnings with assurances that everything was proper. Donations from the operators to the ruling party helped assuage any fears government might have had, of course. At its height, the schemes had absorbed the equivalent of nearly half a year’s GDP – translated into terms of the US economy today, that would be around $9 trillion, or around twice the market cap of Facebook, Amazon, Apple, Netflix, and Google combined – and then they collapsed. It’s not totally clear where the deposits went; almost certainly most of it ended up in offshore accounts, and the organizers of the schemes mostly fled the country. A few of the companies were wound up and returned some money to investors, but mostly, the companies and the money just evaporated.
The country then descended into chaos. What happened exactly isn’t totally clear – and the nature of social chaos means we’ll never really know how things spiralled out of control. In cities around the country, protests and riots broke out more or less simultaneously. These protests weren’t surprising, but they quickly started targeting government buildings and in particular, police and army outposts, and the rioters – or were they just gangsters taking advantage of the protests? or agents provacatuers slipped in from Serbia or Russia or even Greece? – seized weapons and looted government property. These began largely in the south, and in a matter of weeks, whole areas of that part of the country were beyond government control. Rival gangs gained power in different cities and began setting up checkpoints to rob travelers; they fought pitched battles against one another to gain access to factories and bank branches in order to strip them of anything valuable. In the capital, the government made the fateful decision to open up the army arsenals of the north and hand out weapons to individual citizens to enable them to protect themselves – which only heightened the violence.
Eventually even the capital descended into chaos, and the UN finally authorized an Italian-led multinational force to come and restore order. The gangs were no match for proper modern army troops, and over the course of a couple of months, the guns distributed through the populace and the gangs had either been seized by peacekeeping troops, or sold by enterprising gangs into the Kosovo region to reignite the war there between ethnic Albanians and the Serbian army, thus extending that conflict – which had been largely contained – for another several years. (As an interesting side note, my host pointed out that captured Albanian arms were then distributed to Afghan fighters by US troops in 2001 and 2002 after the post-9/11 invasion: Kalashnikovs are much better guns for a desert war than anything America puts together.) But with the weapons out of the scene, new elections were held, the government was able to reestablish order, and the foreign troops left in a fairly quick way, only a few months after they first landed.
The conspiracy theories involve all sides. One theory holds that the Russians, seeking to give the Serbs support against the NATO peacekeeping efforts in former Yugoslavia which had succeeded in winding down the civil war there, inserted agents into Albania to incite the protestors to move beyond peaceful marches and demonstrations to loot the armories in the south. Another holds that the Albanian government either incited the violence or, once the anarchy in the south took hold, took advantage of the chaos to get arms into the hands of gangs who would then arm the ethnic Albanians in Kosovo, which they were otherwise prohibited from doing under the NATO-enforced cease fire across the border. Another theory holds that the Serbs incited the violence to demonstrate to the world that Albania and Albanians are inherently incapable of governing themselves, thus giving them the causus belli to reignite their efforts to rule over (and commit genocide in) Kosovo. Maybe Macedonians incited violence to acquire weapons for their fight against both Greece and Serbia, or maybe the whole thing was done by private gunrunners looking for free inventory. There is even a theory that the violence was incited by the Ponzi scheme operators themselves as a means of essentially scorching the earth behind them – who would care about prosecuting financial crimes when the country was descending into armed chaos?
I mentioned to my friend that it’s always struck me that conspiracies never really pan out, in the sense that their true nature is always revealed, if a group of people does in fact try to secretly engineer some nefarious event; or alternatively, the attempt to engineer an event leads to unintended consequences which makes the actual targeted outcome sought by the conspirators never actually come to bear. In other words, conspiracies are either found out, or they create something far different than intended. He didn’t disagree, and pointed out that what actually happened in the long run – with the intervention by the international powers, the overthrow of the government and the election of a classic liberal democratic party, the eventual restoration of peace, and the long-term commitment to rebuild Albania taken up by the US and others – was completely unpredictable at the outset. But he also felt that clearly, this wasn’t just a random and spontaneous eruption of mob violence in the wake of a systemic collapse. Clearly, he thought, there must have been some intentional sparks.
And as I thought about it, I think he’s right. In times of massive upheaval, thoughtful and cunning individuals – and groups of individuals – will look at events and think of ways to exploit them for their own benefit. They realize that people living through a crisis are scared, and fearful people are easily convinced of the presence of other dangers that aren’t really there, and can be nudged into actions that are in their worst interests viewed objectively but when viewed through the paralysingly narrow lens of fear, seem totally rational. All the conspirators have to do is keep their wits about them and lie and mislead convincingly; the terrified mobs can be depended upon to do the rest. And in environments of true social collapse such as Albania experienced in the wake of losing their entire national savings base – people had sold houses to invest in the Ponzi schemes, even convinced relatives abroad to lend them money from overseas to buy shares in the vehicles – people truly are at their most terrifyingly gullible.
But as we talked, I noted that in that kind of environment, it was unlikely that there would be just one group of people who would be executing a single, monolithic conspiracy. Sure, the idea that the government – seeking to arm the Kosovar rebels – could see a window where they could achieve aims which wouldn’t be possible in normal operating conditions. Look, they told the people of the north, the people of the south are armed and you aren’t – you need to get weapons, and we’ll give them to you to protect yourself. In the logic of a moment of terror, this seemed perfectly reasonable – akin to arming teachers due to the rise in school shootings in the US, say. Let’s ignore the fact that a concerted effort to disarm the southern gangsters would have made far more sense and been far more effective – and which is what happened once the international troops arrived. But in the moment, with your neighbor brandishing an AK-47, ostensibly for “self-defence” but who knows why really, you want one too – my lunch companion called it the inescapble logic of the gun. The government releases the weapons, the people feel marginally safer being able to protect themselves, and a decent chunk of them end up in Kosovo – the conspiracy is pulled off. But the Russians realize they could have their objectives filled too – some of the weapons will end up in Serbia, and the chaos will discredit NATO and the Balkan peace process. The Serbs logic is no different. And in any chaotic environment, psychopaths see a window to play out their darkest desires and narcissists comfortably play out their own fantasies of ubermensch superiority.
Well fine, you may say, but the real conspiracy theory here would focus on the Ponzi schemes, right? That’s what creates the chaos which conspirators can exploit – so in theory they would have started at the ground level with the financial scam, with the added benefit that they grab some cash along the way. How had they been set up? Weren’t those the real conspiracies? Well, yes, but as conspiracies go, they were fairly out in the open. As my friend pointed out, there were plenty of credible observers who knew that they had been set up to finance smuggling operations, that their promises of returns were wildly unrealistic, that they were pyramid schemes, that they would collapse. The evidence was all there for the taking. And most of the schemes were run by people with well-understood motivations, not aligning at all to the mysterious cabal motivations of those who purportedly incited the violence after their collapse. In fact as the schemes operated, new schemes would pop up run by clearly just greed-motivated operators. One scheme actually had so many investors lining up to earn their ridiculous concerns that when it was seized by the government, it had nearly $50 million on deposit at a proper regulated bank because they couldn’t illegally cycle the funds quickly enough and they didn’t want to sit on the physical currency. At some point, one would think, even gullible people would realize that there was something rotten in Denmark.
But the general public fell for it, and continued to pile savings into the schemes until they collapsed. The IMF’s report on the schemes chalked this up to the fact that the Albanian people were, broadly speaking, completely unaware that such things as pyramid schemes existed; after living in one of the most completely communist regimes on earth (one which had severed ties with the Soviet Union when Krushchev went soft, and kicked out its Chinese advisors when that country opened up to Nixon), its people had no idea of the relationship between risk and return. The idea of doubling your money in two months, or trebling it in three, just seemed “good”, not “too good to be true” and certainly not “so good that it violates normal notions of returns.” People were poor and wanted to be rich, and the returns on offer seemed to promise a pathway to riches. Ignorant and greedy people are essential to any successful scam; all people are at least a little greedy (and most, in my observation, are more than a little), and the ignorance was amply supplied by 45 years of living under Enver Hoxha.
But as I think about modern society, aren’t we replicating what Albania had in the early nineties on a much more massive scale? The ignorance we face today is our inability to process complexity and interconnectedness. The ruling elites of today – actually, all of us – grew up in a much simpler world, where domestic economies were far more segregated and, in a real sense, linear in operation. They were educated to detect and interpret linear chains of causality, where even society itself could be viewed as a directly additive function of the actions and intentions of individuals. Systems thinking – where individual actors are simultaneously influencing other actors’ potential range of actions while they are also being influenced by others – is not really integrated into our formal representations of how societies work. Physicists at the subatomic level understand this “everything impacts everything at once” operation, which is acknowledged to cloud our ability to model the macro-scale (macro at the level of atomic and surpratomic chemical and biological processes) using a direct expansion of quantum mechanics, but that’s really the only area of knowledge that formally and explicitly recognizes the full challenge of complexity. Network theory, embedded into much of our understanding of how communications systems work, is interesting, but it is static and we haven’t developed a means of exploring that in motion and with the intersection of randomness; we can only observe. We aren’t equipped intellectually yet to understand the world we have created.
In less than fifty years, we have linked everyone on earth with everyone else (or for all practical purposes we’ve done so). Fifteen years ago in Albania, I could only get a reliable internet connection at my hotel, which also housed the NATO mission in Tirana and thus had a whole array of modern telecommunications equipment. Last week, everyone I met, and most people I saw walking on the street, had a smartphone, in many cases a more recent model than my own. When I went to the Phillipines two years ago, I visited a small village for lunch on the way to a meeting, and while chickens played in the yard and stray dogs competed for snacks, the elderly woman who owned the roadside stand watched television on her phone while we ate. Our world now has the capacity to instantaneously transmit the impact of something on one side of the world to another – but we have been trained in the folkways of a pre-connected world. It’s not really any different than the experience of the Albanians in 1992, trained in a world where the state owns everything and tells you what to do but then released into a new social construct where you own your stuff and have to figure out on your own how to ensure you keep it and get the new stuff you need to live.
The modern Ponzi schemes are around the conflation of “data” with “value,” and with the collapse of understanding individual human beings into a quantifiable field of discrete information with no transcendent or unquantifiable sense of self, which emerge in the Facebooks and Googles of the world. It’s not the obvious bubbles – subprime lending or the like – which are pyramid schemes; it’s buying into the notion that we’re obtaining this interconnected world at effectively no cost, just clicking on a user agreement and accepting the cookies (I love that term, by the way, because it’s so obvious – here’s a cookie, yum yum, don’t pay attention to what I’m taking from you when I give you the cookie), and that we are, in fact, simply homo informaticus and not homo sentiens (Dad, please don’t criticize my Latin – you get the point). My question is, if we are truly in an interconnected earth, then what happens when the pyramid scheme shuts down? There’s no Switzerland left where the perpetrators can escape to; the scheme operators are stuck here too (although maybe that’s why Elon Musk wants to go to Mars, and Peter Thiel is building a bunker in New Zealand). And what, exactly, is being extracted from us that we will need to violently reclaim? I’d argue that it is our access to the personal sphere, our access to love and the capacity for that love to rise above merely instrumental actions such as control and valuation, but that’s probably a different essay.
For now, though it’s enough to understand the environment. As I say, all that’s required for a successful scam is the intersection of fear and greed, and surely we are in the same position here as Albanians were twenty five years ago. The fall of the Hoxha regime was sudden, violent, and involved the complete collapse of a world-social construct in a matter of months – but that isn’t that far off from what’s happened in the last decade to Western, or even global society. We have gone from being recognizably local to being terrifyingly exposed to a global information and interconnection tsunami. It takes real effort to carve out spaces to process this on our own and mostly we can’t do it, we’re forced to compete in a new world where global arbitrage accelerates the rate at which we all are forced to find our individual competitive advantage. In such an environment, fear is real, and we’re still almost electric with the sensation of something new emerging without being yet armed to deal with it. And so we run the risk of being sitting ducks for con artists. Whether it is Putin, or Trump, or Zuckerburg, or Musk, those that put morality aside and simply try to rev up our fear and get us to buy, or invest, or believe in something are ideally placed to actually pull off the scam of their choice.
Our greed is easy to see. We used to have external impediments to our natural compulsion to seek more and more pleasure, but those are falling away quickly. And as a species, we are simply not good at self-regulating pleasure, whether it is food, material comfort, sex, or the mindless activation of our pleasure centers in drugs and shiny objects. As a species we evolved to cope in a background setting of physical scarcity and the uncertainty of ever obtaining the next meal, but we have created an environment where we can, really, meet every need without actually utilizing our full capacity. Historically, society created structures which provided moral explanations for limiting our access to pleasure. Given that in most cases the productive capacity of society couldn’t have met the demand for them anyway, having institutional or theoretical reasons (religion, public morality, shame structures) why we shouldn’t pursue it was particularly helpful. But those institutional structures, which could have served to limit our insatiable demand for pleasure in this now unconstrained world, are now largely discredited, and we’re left to our own devices in a world of, effectively, unlimited capacity to fulfill those desires to the point of addiction and death. Our default mode of operation is to pursue pleasure without end because we evolved in a world where the physical environment itself would cut us off before we strangled ourselves in bliss; now, we just end up Type 2 diabetics, addicted to painkillers or sex or glamour, choking on our own vomit in the bath.
Again, the elements are there just like in Albania in 1992. The loss of communism for them is equivalent to our loss of societal structures for limiting our own greed; the ignorance of the market that was faced by Albanians is no different than our confrontation of a superconnected, hypercomplex world with coping tools that were built for linear simplicity and a manageable localized landscape. That lovely country, located at the juncture of the Adriatic and Ionian Seas, bathed in sunlight and with the best tomatoes on earth, ended in civil chaos, with more than 2,000 known dead, hundreds of thousands fleeing across the Adriatic to Italy out of a population of three million. More importantly, though, it was only really rescued by an international relief effort. We don’t have access to that as a cure this time around. Civil chaos – in whatever form, and I’m not saying necessarily that we’ll be fighting in the streets (although the US is certainly well-armed enough that I could see that being an issue there) – will not be solved by a benign external intervention, unless we’re lucky enough to have some aliens hiding on the dark side of the moon ready to sort things out.
But back to the restaurant by the lake.
Every part of the conversation at lunch was fascinating – it was maybe the best meal I’ve had in years and would have been even if we were eating broth and crackers. One thing he said was particularly striking. He was thirteen when the chaos erupted in 1997. His parents didn’t have a gun, even though everyone around them had armed up, some neighbors even installing an anti-aircraft gun on their roof. Every night the others would fire their weapons into the air around six-thirty, a sort of demonstration to everyone else that they were armed and shouldn’t be messed with. But what is shot up will come down. His family stayed inside, and his parents made sure his bed was moved away from the window so that the bullets, falling back down to earth on their random parabolas, would not strike him in their descent if they came through the window. He survived, and Albania is doing pretty well. He also said that by the time NATO intervened, most of the gangs had killed one another in waves of gangland warfare, making the mop up effort surprisingly easy. The whole cycle – from the collapse of the con, to the chaos and killings, to the restoration of order – took just about seven months. Let’s hope, at least, that the conspirators of the pyramid scheme on offer this time limit their slaughter to themselves, and that we escape quickly, and rebuild as well.
We took a taxi to my hotel, and he wished me a safe flight back to London. I told him I hoped I’d get back to Albania soon. I meant it.