Montreal, July 6, 2002  /  No 106  
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Daniel M. Ryan is a self-educated Misesian economist. He lives in Toronto. His work can be found at
by Daniel M. Ryan
          It's just before Canada Day as I write this, and life is as usual in the Internet-entrepreneurial rock pit. Today's attempt to collect a few pennies by reading paid E-mails, most of which carry a rate of 0.5 to 1 cent for a 20 second visit to the advertiser's site, has been stopped by the host of several of these programs having its servers going down. Right at the time I myself sent out a paid ad for a book of my own. 
Life on the net 
          Life continues as usual here. Instead of getting on the phone and complaining angrily to an Ottawa bureaucrat, I just send a letter to the webmistress, with whom I already struck up a friendship.  
          My troubles are not confined to the pay-to-read sector, the Internet's answer to the paper route with a similar work load and pay rate. Many months earlier, I dealt with an affiliate company which seemed to be not quite on the ball. After a few polite letters concerning a stats issue which were not quite resolved to my satisfaction, I took action. 
          No; I didn't plead-with-a-yell to the Federal Trade Commission. I took down their ad code from my own site and walked.  
          If I had been the braggart sort, there would be lots of bar stories in my mouth for the college girls. All those sharp business practices which our teachers and professors terrorized us with in school are a normal part of the sleazier side of the Net. Ponzi schemes? I got a response from the runner of one, which assured me that his own brand was legal because each entrant is buying access to (among other things) free E-books. That answer presumably is enough for a defense lawyer to convince a judge of its legality. 
          Penny stock? I get an E-mail ad for one of them approximately every two weeks. 
          Hard-core porn? I watched a lot of it. As part of an automatic hit-exchange site where I had to watch others' pages in exchange for them watching my own. Such sites support themselves by giving you a fraction of a page view for every one you view yourself, and then (hopefully) selling the rest of the space. The Site in question offered a ratio of 7 pages served for every 10 pages the member viewed. I saw so much nudity of that sort, the girls began to look almost like men. 
          Child porn? Easily available. Almost as easy as it is to get a hold of a disk cleaner to erase any trace of evidence in your system, if you pay for it. People that are broke have other options, such as budget-box disk erasers, but these have to be nursed sometimes. One freeware version I was using conked out in the middle of the clean and left me with a completely full hard disk. This is the amateur's worst nightmare, conjuring up images of an amateur electrician with a blown-apart space heater. I had to quietly think it over for an hour before I recalled enough technical knowledge to diagnose the problem. 
          Of course, the porn sites are not free of their problems. A lot of the porn I saw posted on the Usenet clearly was ripped off from the pay sites, in a manner analogous to warez (= pirated software). Since this business has its illegal side (more than a few sites trumpet this), it serves as a clear example of how business functions under anarchy: they basically live with the "five-finger discount." There are just too many potential thieves to stop the lifting, and Bill Gates is as hated as ever for his February 1976 smack-down on early software piracy. Any would-be Gateses in this field are laughed at heavily; they've been thoroughly pegged as self-righteous. So there's nothing that can be done, except accepting the loss and hoping that enough of the freeloaders get themselves hooked enough to wind up in trouble in the real world. (Then, I am sure, they are stiffed.) 
"Multi-level marketing" schemes 
          It's the same for any sort of content provision.'s attempt to provide "premium content" is a well-known joke. Instead of relying upon the laws of the land, it's easier to simply stop providing and walk to another field if you're small, which almost all Net provisioners are in terms of revenue. That's actually an incredible help when it comes to fending for yourself: if you lose the score-keeping ethos, then you see that you have little to lose when you walk. Of course, such a realization also makes it plain as to what the rates of pay for your work actually are, but independent contracting is the norm here. A Net opportunity that reliably scarfed the minimum wage would be leapt upon as if it was a field of gold. 
          So most of the opportunities are of the entrepreneurial sort: the standard genus is "multi-level marketing" schemes which pay the sole operator a pittance, net of the tuition you pay largely in sweat. In order to make any sort of a living, you need to sell others on the opportunity you've signed up for: your incentive for doing so is a percentage of their earnings, a rate determined both by what the opportunity provider offers you and by the number of levels you are from the signee under you. Here's an example from a paid-to-read site I myself belong to, the one I have had the most success with: 
              I have a 4-level downline consisting of this number of members: 98 on my first level (those that signed up as a direct result on my own sales efforts); 65 on my second level (signed up by those in the first); 23 on my third (signed up by members on the second); and 8 on my fourth. This has netted me, in a few months, $29.66 in earnings, of which $4.55 are my own for mails I myself have plowed through. The relevant terms are: 15% of the first level's earnings; 10% of level 2's; 10% of the 3rd; and 5% of the 4th level. Despite tales of letting a large 1st-level downline multiply into a huge multi-level money generator [without any effort once it's in place, of course], this record is pretty successful in the Net world: downlines with the lower levels being larger in number than the more immediate ones (often advertised as a realizable goal) are in fact quite rare. This program is also shaping up to be a successful investment in conventional terms, as I paid $48 U.S. to acquire the downline. The payback period could be six months for this investment.
     « If you ever entertained the delusion that the entrepreneurial class is a bunch of spoiled pretties who generate money as if from an invisible God, you'll lose it after several months in the rock pit. »
          But, like any other track record, the single success story omits many other attempts that are far less to brag about. Another paid-to-read program I belong to, I spent about $80 U.S. to acquire a downline. This one has led to a first level of 42 members and a second level of 47 – net of cancellations. The first level was as high as 110 but most of them either quit or were terminated for not reading the mails: they had signed up just for a bonus I had centered my ad for this program around. The eighty dollars spent has netted me from this other program $8.10 US, of which $1.90 are my own earnings. The payback period for this investment, if I were lucky, would be more than a decade.  
          The second one is an example of my lesser success. I have several plain failures lumped in with my overall track record: $450 U.S. put in for a wide variety of ads, spent over the last two-and-a-half months. As of now, my total receipts are $17.24. This should be $27.24, but one payer was broke at the time I asked for payment, so I accepted a cut-rate paid ad in lieu of cash. Even the owners of the Get-Paid-To-Read programs consider themselves lucky if they don't have to go to work to make ends meet, so that makes insistent people outcasts in this world. 
          The bigger versions of Multi-Level Marketing (MLM) involve selling products, although more than a few of them tend to treat the product itself as an afterthought. You buy into a program and, in return, you get a commission from your downline with a rate structure specific to the opportunity being offered. Theoretically, this should be a percentage of your downline's commission for the sales they make, but most opportunities here involve selling how-to-succeed-on-the-Net packages, so the building of the downline and the selling of the product are blurred. Small wonder that the two are often confused, and that chain letter scams are a normal part of the business environment. (I've joined none of either type.) 
Really low response rate 
          The other kind of opportunity is the ad exchange. In return for serving ads on your own site, or for viewing them, you get the opportunity to send out ads of your own. As you might guess, the response rate for this kind of advertising is really low: you tend to chalk up the time spent as educational in nature. 
          If you ever entertained the delusion that the entrepreneurial class is a bunch of spoiled pretties who generate money as if from an invisible God, you'll lose it after several months in the rock pit. Most of the ads for various MLM schemes actually use this delusion as a means of making you sign up and pay the member's fee, but simple common sense – seeing yourself as not advanced enough for a real investment until you've spent real time and effort promoting the opportunities that are free to join – shakes you free of it. The more experience you have scrabbling in this field, the more surreal the usual teacher's description of "the market" appears. The only model that makes a sort of sense is the one in Atlas Shrugged: the easy wealth is made through "strategic alliances" with the State – money and promotion in exchange for being a poster boy, a sort of walking advertisement for a party which really, if quietly, despises commerce. The left-wing equivalent of this model, which is even more prevalent, is that the only way to make money is by allying yourself with the "powers that be." More than a few services, such as search-engine optimization programs, hint at making this easier for a fee. 
          Hence the feudal character of a lot of Net entrepreneurship. Since the money is (to be honest) pitiful for the average participant, anyone who makes a real score is almost idolized. People who have made a full-time living on the Net find it easy to turn themselves into a product as self-help gurus; if you venture into this field, you'll see quite a few revered names, over and over again. Like Hollywood, these people live on glam and hype, and realists are seen as an enemy (unlike Hollywood, if you don't mind me adding this). Enemies are dealt with by smearing and/or slander, the latter another type of crime in the real world. 
          That's the risk you run if your reputation matters to you. People whose good name and good word means a lot to them are really vulnerable to those who care about neither. They tend to be sized up as "good dogs" because of this, and the "property of the self" ethos translates easily into viewing other people as property. So a left-wing type could find much to get angry about in this field, especially since a lot of the ads also use a steady diet of subtle guilting. (This follows from the amount and variety of "free stuff" in this sector.) 
Free to walk away 
          But those who see the Net as some sort of blooming tyranny are, quite obviously, missing something: you're really free to walk away anytime that you please. You're also free to let the gossip run its course by disdaining to reply, which seems to be the optimal course of action when faced with the slander-mongers. There are Hooveresque fantasies dancing in more than a few operators' heads, but the effectively universal freedom of entry and exit keeps these plans vegetating in a cloudopolis. 
          Another big help is being inner-directed. If you see your great dream as nothing more than the expression of your personal greed, you find it easier to walk away from a route that in retrospect is either a dead end or blocked off. Sometimes, this kind of moral self-protection is hard, especially since inflaming greed is the standard ad ploy for any opportunity, but doing so makes you a lot harder to be taken advantage of. If there was ever a place where Rousseau's ethos of "poor and proud" has a practical value, it's in Net entrepreneurship, along with the ethic of treating ex-employees-turned-Netizens that were fired as would-be folk heroes. The poor and greedy are easy to hook, and (sadly) so are the poor and self-ashamed. 
          It would be easy to conclude that the field of small-time Net commerce is a thriving and happy-enough anarchy, but that would be a mistake. What keeps the anarchic part of it thriving is the fact that the real world is fully lawed, and the fear that the local police are hearing anonymous whispers about you behind your back and listening to them. People who think they can divide up their world into lawful real-world citizen and freebooting Netizen tend to be restrained by this, as the police have the right (and professional duty) to keep a close eye on any oddball in the town. 
          There's really only one way to live in this world that protects you from the special pitfalls of this "virtual anarchy" which is very much like a layer of icing supported by the cake of custom and of law: holding to two rules. The first is living a quiet blameless life while not speaking at all of your virtues. People that hector are quickly thought of as hypocrites, and people with a real dark side are easy prey for blackmail. The second rule is one that would shock your favourite anti-capitalist teacher or professor to the core of his being: Greed is suicidal. 
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