I’ve listened to two great podcasts in the last couple of months — The Missing CryptoQueen, and The Drop Out — and noticed interesting similarities in their stories and what they tell us about power in our society.
The Missing Crypto Queen, made by technology expert Jamie Bartlett for the BBC, tells the extraordinary story of a cryptocurrency called OneCoin.
Cryptocurrencies, as I’m sure you know, are new currencies that have sprung up in the last decade, like BitCoin and Ethereum. Unlike traditional currencies, which are secured by national banks, cryptocurrencies are run on their own exchange systems (called blockchains), offering investors a way to invest without taking on government risk.
One of the hottest cryptocurrencies was OneCoin, which launched in 2014. Its CEO was Dr Ruja Ignatova, a young, stylish Bulgarian with a PhD. She appeared before adoring crowds at OneCoin rallies (check out this one at Wembley in 2016), and told the hordes they were part of OneCoin’s global family and would change the world forever.
OneCoin attracted around $4 billion in investment, mainly from small investors around the world, who could watch excitedly as their investments soared on OneCoin’s internal exchange.
The only problem was, there was no way for them to cash in. It turned out that OneCoin didn’t actually have the necessary blockchain technology to support it. It was a virtual currency, a Ponzi scheme. Dr Ruja disappeared — the podcast-makers tried to track her down, and got as far as Bulgaria, where it was suggested if they kept looking they would meet a messy end at the hands of the Bulgarian mafia. What a steal eh? $4 billion. And some people are still investing in OneCoin, because they are so invested in the story.
The second podcast I listened to recently was The Drop Out. Made by Rebecca Jarvis for ABC Radio, it tells the story of Theranos, a once-hot medical tech start-up, and its young founder Elizabeth Holmes.
Holmes founded the company when she was a business undergraduate at Stanford — she dropped out when her fledgling company quickly attracted millions in investment. She claimed to have invented a new technology that could test people for hundreds of medical conditions, instantly, using one drop of blood. This, she said, would transform the medical world, doing away with painful, time-consuming and costly blood-tests.
It was a dazzling vision and she sold it wonderfully. She modelled herself on Steve Jobs, hiring the same designers and advertising team, even wearing the same black polo-neck, and she seemed to offer the same story of a young genius who will change the world. Unlike Dr Ruja, Elizabeth came from an affluent background, and this may have helped her recruit a stellar board of advisors — all old white men — including Henry Kissinger and George Schultz. She attracted around $700 million in investment, mainly from old-money families connected to the Republican party. The media loved her, audiences at TED loved her, Bill Clinton loved her.
The problem, again, was the magical technology she ‘invented’ didn’t actually exist. Theranos got as far as launching booths in Wallgreen stores, but in fact, they would draw blood using traditional needles, then send it back to their labs and test it there. It was a far cry from the sales pitch of ‘instant tests through one drop of blood’. And their tests didn’t even work half the time.
Like OneCoin, any critics who suggested something was wrong at Theranos were attacked, threatened with legal action, and abused for not believing in the beautiful vision. But, like OneCoin, the truth eventually came out. Holmes is now on trial for fraud and may go to prison.
The two cases have a lot in common. Firstly, they both show the power of story. In behavioural economics — a field of psychology which studies the ways our automatic thinking can misread situations through biases and logical fallacies — this is called the ‘narrative fallacy’. Our minds love weaving stories and often ignore facts that don’t fit with the story.
OneCoin and Theranos were such great stories, people got carried away by it and didn’t stop to ask if their technology really worked. Both leveraged the power of the financial media (although a widely-circulated Forbes profile of Dr Ruja turned out to be an ‘advertorial’ OneCoin had paid for).
I started my career as a journalist at a finance magazine, and honestly, the world would be a better and safer place if you just abolished 90% of financial journalism. Financial journalists on the whole are not number-crunchers, they’re story-tellers. The better the story, the more coverage it gets. Most financial journalism just creates noise and hype.
Secondly, both cases illustrate the power of beauty. Both Dr Ruja and Elizabeth Holmes were relatively good-looking and glamorous (for CEOs, anyway), and their glamour (a Celtic word meaning ‘spell’) helped enchant and distract investors. In behavioural economics this is called the ‘halo effect’. This is when a positive aspect of a person or company — such as their good looks — leads you to think they must be good in other aspects, such as their intelligence, competence or morality.
Study after study has found that people tend to think that more attractive people are smarter, kinder, more trust-worthy and better leaders. We make biased judgements based on facial symmetry, on height, on depth of voice (Elizabeth Holmes cannily lowered her voice when she launched Theranos).
Tina Fey in 30 Rock called it ‘the beautiful bubble’ — in one episode, her character dates a character played by John Hamm, who completely overestimates his own abilities, because he’s so good-looking no one gives him honest feedback.
Good-looking people just assume other people will do things for them…and we probably will! I was in a gym the other day, and a beautiful woman came out of the women’s changing room, wrapped in a towel. ‘I need someone to tell the front desk I’m locked out of my locker’, she said. ‘I’m just waiting for a friend’, I replied. ‘I’m kind of in a hurry’, she said. Pretty privilege! She was used to people dancing to her every demand.
In the era of YouTube and Instagram, pretty privilege is all powerful. Look at the love and adoration that people channel towards pretty Instagram influencers like Chrissy Teigen or Kylie Jenner. They post comments like ‘Oh my God I love you so much you are adorable’. It’s cultish.
You see the halo bias play out in all industries. You see it in books — if a new author is good-looking (male or female), every feature or even book review features a large photo of them. Their looks make it far more likely they will get stories written about them. Jia Tolentino is quite a good essayist, but is she really as good as the hype suggests? Is Zadie Smith really one of the great novelists of her generation? If the world only knew Jordan Peterson from his books, he would never have been anyone at all. He rose to worldwide fame because he is good-looking, charismatic, and he courts controversy.
You see the halo effect in ideas and spirituality. How many successful tele-evangelists are ‘hot priests’? Jason Silva’s YouTube spiritual monologues are hugely popular in large part because he has a big, stupid, handsome face. Teal Swan, the online New Age guru, attracts thousands of followers because she’s hot. Beauty makes the world go round.
I could rail against it, as a short not particularly photogenic red-head. But why? I should deepen my voice, get a black polo-neck, and teach myself to talk without blinking, like Steve Jobs did. You can’t fight the Halo Effect, you can only learn to use it.
Anyway, let’s be frank, I have all kinds of other biases going for me — being white, English and posh for example. I was with a friend yesterday at a book launch, and we met the organizers and spoke together for a while. We were all speaking in posh accents. My friend is not posh, and I could feel it like an invisible barrier of class and privilege. Later, she asked me if I knew an elocution expert.
And there’s a flipside of ‘pretty privilege’, particularly if you’re a woman. People might discount your intelligence, or patronize you, or constantly pester you, or even resent you for your looks. Or they might value you only for your looks, and treat you like a trophy. One of my friends, who is good-looking, said to me: ‘None of my boyfriends went out with me for my personality’. That’s a sad thing to say.