Deep structures
of financial pyramids

By Alena Ledeneva

15 July 2020

Alena Ledeneva’s pieces ‘Straw man,’ ‘Double edged’ and ‘Incriminating evidence’ are part of a larger collection of works exploring patterns of informal power. The collection reveals hidden patterns, the know-how of power routinely practiced yet rarely articulated.

Informal power is elusive. Those who have it might not want or be able to articulate it. Those who do not [have it] associate it with exclusive access, secrecy and non-transparency. Ledeneva’s take on the know-how of informal power is that of a ‘rear mirror’ methodology and an “obliquity angle” (as defined in her academic work): the know-how can only be revealed post factum, when it no longer works and cannot be approached directly.

The three pieces presented here reveal the true shape of a pyramid. It is ambivalent: both stable (at least in the idea of tetrahedron) and fragile. It is both vertical and horizontal. A financial pyramid is double edged – in a long run it hits both the top and the bottom. Multi-layered marketing schemes (MLMs) are widespread and legal, yet may end up in court, as the well-known cases of subprime mortgage in the US and the MMM financial pyramid in Russia show. The black box of the financial pyramid is complex, yet it has a time-bomb effect.

Ledeneva's collection was created in 2019-2020. It relies on the global dataset of open secrets and hidden practices of The Online Encyclopaedia of Informality, www.in-formality.com.

1. Straw man

Just like the Scarecrow, in the Wizard of Oz, my Straw man lacks a brain. A believer in miracles, each Straw man knows one’s own limitations and hands over the management of his finances to a Patron, who eventually uses them to serve his own purposes. Tetrahedron, the structure behind this work, is the most stable mechanical form, but its stability in the context of financial pyramids is fragile. One day the straw men, lacking substance and integrity, will wish for a ‘death to the patron!’

2. Double-edged

Insiders exploit outsiders, yet they are the hostages themselves. Outsiders seek competitive advantage and super-profits, yet lose more than they gain. The deep structure of the pyramid is double-edged sword. If something sounds too good to be true, it probably is.