Brooks and Nocera

In “The Biden Formation Story” Bobo babbles that in discussing his grief with Stephen Colbert, Joe Biden revealed what could be the core of a very compelling presidential campaign.  In the comments “View from the hill” from Vermont said “I take Brooks’ point, but by the end he has reduced Biden’s grief to a campaign device.”  Which is typical Bobo.  Mr. Nocera, in “The Pyramid Scheme Problem,” says the F.T.C. tries to shut down illegal pyramid schemes yet won’t explain how they differ from legal multilevel marketing companies.  Here’s Bobo:

Last month I wrote that Joe Biden should not run for president this year. The electorate is in an anti-establishment mood, and as a longtime insider, Biden, I argued, would suffer from the same disadvantages Hillary Clinton and Jeb Bush are now enduring, without any of their advantages. It would end badly.

But then came Biden’s moment with Stephen Colbert. His discussion of his own grief over his son Beau’s death was beautiful and genuine and revealed the golden heart that everybody knows is at the core of the man.

Biden talked about Beau. “My son was better than me. And he was better than me in almost every way.” He gestured toward how fluid grief is, how it goes round and round, hides for a few hours and then suddenly overwhelms. But there was something else embedded in that Colbert moment: a formation story.

Every presidential candidate needs a narrative to explain how his or her character was formed. They needs a story line that begins outside of politics with some experience or life-defining crucible moment that then defines the nature of their public service.

Candidates like John F. Kennedy and John McCain were formed by war. Candidates like Bill Clinton and Barack Obama were formed by their rise from broken homes and their dedication to lift others and heal divisions. Without a clear formation story, a candidate is just a hodgepodge of positions and logos.

Democrats this year are looking for a formation story that proves commitment. This is a party that is moving boldly leftward. Its voters want to know their candidate has the inner drive to push through structural changes, not just half measures.

Bernie Sanders has such a story. From his days at the University of Chicago onward, he has been a pile driver for progressive causes, regardless of the prevailing winds. Hillary Clinton hasn’t yet presented a clear formation story. She talks about being a grandmother, which humanizes her, but doesn’t explain how she got to be the person she is.

With Colbert, one saw the kernel of a Biden formation story that could connect not only with Democratic voters but with other voters as well. It is a story of dual loss: his wife and daughter decades ago and his son this year. Out of that loss comes a great empathy, a connection to those who are suffering in this economy and this world. Out of that loss comes a hypercharged sense of mission. Out of that loss comes a liberation from the fear of failure that dogs most politicians, and causes them to dodge, prevaricate and spin.

People who have suffered a loss often want to connect their tragedy to some larger redemptive mission. Biden could plausibly and genuinely emerge sadder but more empathetic and more driven. That would be not only a natural reaction, but also the basis for a compelling campaign. Biden would then benefit from the greater verbal self-discipline he has developed while vice president and from the fact that this year, as Donald Trump proves, voters seem tolerant of free-talkers.

Democratic voters aren’t the only ones looking for a strong formation story. Republicans are looking for one, too, but the nature of the Republican race is different. If Democrats are arguing over what positions to fight for, Republicans are arguing about how to fight.

Republican presidential candidates have found that the strongest way to win favor on the stump is to attack the leaders of their party in Congress for being timid and inept. Many Republican voters are alienated from their party’s leadership. They’re looking for a candidate who can lead a mutiny.

Donald Trump’s mutiny story is pretty clear. In doing business deal after business deal, he mastered the skills needed to take on the morons who are now running the party and the world. Ben Carson’s story is clear, too. Through his faith and through his medical career he developed the purity of heart and the discipline of will required to walk into Washington without being corrupted by the rottenness found there.

The Republican desire for a mutiny has kept Trump and Carson aloft longer than most people supposed. I still think they will implode. Their followers need them to be the superheroes they are portraying themselves to be. But politics is hard, especially for beginners, and sooner or later they will flounder and look like they’re in over their heads. At that point it’s all over. At that point, a Bush, Rubio, Kasich or Walker will have an opening to tell a different and more positive story.

On the Democratic side, a Biden run would be more formidable than I thought last month. You need emotion to beat emotion. With Stephen Colbert he revealed a story and suggested a campaign that is moving, compelling and in tune with the moment.

Just imagine — Biden decides to run and then all we’ll hear out of Bobo is how he can’t keep his mouth shut and is always coming up with malapropisms.  You heard it first here.  Now here’s Mr. Nocera:

“I have nothing for you,” said Frank Dorman, a spokesman for the Federal Trade Commission. “Lots of reporters have asked that question. Our final response is, We’re not going to answer it.”

What had I asked that was so sensitive that the F.T.C. wouldn’t respond? I had requested that the agency explain what distinguished an illegal “pyramid scheme” from a legal multilevel marketing company.

What had prompted my question were two recent events. In late August, the F.T.C. had gotten an injunction issued against a multilevel marketing company called Vemma Nutrition, claiming it was in fact a pyramid scheme.

And last week, Fortune magazine published a lengthy story by Roger Parloff about William Ackman’s nearly three-year battle to force the government to make the same declaration about Herbalife. The company, of course, has fought back hard against the hedge fund manager’s allegations, insisting that its business practices are above board.

Indeed, the F.T.C.’s move against Vemma has caused both sides in the Herbalife battle to claim vindication. Although the F.T.C. has been investigating Herbalife for some 17 months, Timothy S. Ramey, a stock analyst and Herbalife bull, raised his price target for the company, saying Vemma’s business model was clearly different from Herbalife’s. Meanwhile, Ackman prepared a 29-slide deck with side-by-side comparisons of all the ways, in his view at least, Herbalife’s business model was exactly like Vemma’s.

So which is it?

As Parloff notes in his article, “The Siege of Herbalife,” there is no law defining a pyramid scheme, nor are there even any regulations on the books. The simple common-sense definition is that a pyramid scheme is a business in which recruits make a payment for the right to recruit others into the network, and whose revenues are more dependent on recruitment than on selling a product.

But it turns out to be so much more complicated. In 1979, the F.T.C., after investigating Amway, a multilevel marketing company with a vast product line, decided that the company’s business model passed muster — even though recruitment was at the heart of it — because it claimed to take certain steps that (among other things) supposedly showed that its recruits were selling the company’s products to real customers, not just to other recruits. Very quickly, other multilevel marketing companies adopted the “Amway rules” to stay on the right side of the F.T.C.

Yet the Amway rules have never been codified into regulation — they’re really more like suggestions — nor have they ever been proved to mitigate the harm pyramid schemes do in taking advantage of recruits or lying to them about the potential to get rich. (A vast majority of those who sign up for pyramid schemes lose money, sometimes lots of money.)

For a while, the courts and the F.T.C. seemed to say that a truer test of a pyramid scheme was how much of its products was bought outside its recruitment network (meaning they had real customers who were not involved in the pyramid) versus how much was bought by those inside the network, who were buying precisely to remain part of the network.

But in a recent court decision involving a pyramid scheme calledBurnLounge, the appeals court ruled that it didn’t really matter whether the customer was inside or outside the network, and that the test was actually whether a company’s “primary” purpose involved recruiting rather than “meaningful opportunities for retail sales.”

William Keep, dean of the College of New Jersey’s School of Business, and a pyramid scheme critic, told Bloomberg earlier this year that “in terms of sending clear signals to the industry, the F.T.C. has done worse than nothing since 1979. It sends confusing signals that have in no way helped us understand how to identify a multilevel marketing company that may be a pyramid scheme.”

In the Herbalife dispute, this lack of federal guidelines animates much of the controversy.

Ackman says Herbalife is a pyramid scheme because the only way people can make any money is by recruiting others, not by selling the company’s protein shakes. Herbalife says its business model is on the up and up because it is selling a real product to consumers who sign up more to get product discounts than to become part of a recruiting network. Parloff, after months of investigation, came down more on Herbalife’s side than Ackman’s, though in truth, that’s just his best guess. The F.T.C. wouldn’t talk to him, either.

“Here we are three years into [the Herbalife battle] and it’s no clearer than it was at the beginning,” Keep told me when we spoke. If the government had rules about where the line was between an illegal pyramid scheme and a legal multilevel marketing company, there wouldn’t be any such dispute. It’s ridiculous that we have to guess what’s illegal.

The F.T.C.’s refusal to define a pyramid scheme — and to act aggressively on that definition — is a dereliction of duty.


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