Not many people seek to imitate criminals, but it’s tough to argue with their results. Most criminal enterprises have a pretty attractive cost/benefit ratio. For the price of just one bullet and a gun to put it in, an ambitious thug can easily make a few thousand dollars. A few thousand dollars of airplane fuel can be used to import millions of dollars worth of narcotics. If it weren’t for the risk of incarceration or worse, the rewards of a criminal business would be pretty hard not to chase. Of course, some people can’t or won’t ignore the opportunity for the big money that crime can bring, and those people have come up with some pretty ingenious ways of making an illegal living.
Most criminal businesses aren’t all that novel. Things like smuggling, prostitution, and counterfeiting have been around for longer than there have been people to outlaw them. It makes sense, really: When someone finds a way to make fast, easy money, it’s going to become popular. Sometimes it becomes so popular it just makes sense for it to become legal and regulated. Other times the profit potential is just too good to ignore, and legitimate businesses, or even the government, just have to get in on the act.
Consider the state of marijuana reformation in the USA. At first cannabis wasn’t illegal. Then again, it wasn’t all that popular. However, once it did become popular (ironically partially because of the smear campaign that was used to vilify it), it was so wildly popular that it became an entire underground industry. The only real difference, now, between a drug dealer and a medical marijuana salesperson is the state in which they live.
And so it goes – sometimes a criminal business is given the mandate of the government and a stamp of approval and goes legit, dropping the danger of getting put under the jail and, in return, paying taxes and engaging in genuine competition. Other times the only difference between a criminal business and a legitimate one is who operates it. That’s the case with these businesses, which are legal, but pretty much indistinguishable from acts of crime.
The State Lottery
State lotteries are moneymaking powerhouses so efficient at taking people’s money and giving them nothing in return that it almost seems criminal. They don’t even pretend otherwise. Just look at the various advertising slogans used to part the eternally hopeful from their material wealth: “All you need is a dollar and a dream.” “Hey, you never know.” Those seem like they’d be great ads for condoms, but not for what you could consider the worst business investment a person can make.
The state lottery works, as you probably know, by giving people a seemingly cheap way to purchase a chance to win a relatively enormous amount of money. Of course, the game is slanted hugely in the state’s favor, with the odds never on the player’s side. It used to be that lotteries were illegal in most states. Now there are only seven states without state run lotteries.
What happened? Two things. First, states would occasionally run lotteries to finance specific projects. This lent legitimacy to the concept, and also revealed the great income potential. Second, it was already going on… and the state wanted in. Nothing like complete control of the lawmaking and enforcing of a plot of land to eliminate competition.
The Criminal Version
If you’re a fan of gangster movies, you’ve probably heard of the ‘numbers racket.’ As you may guess from the theme of this article, “The Numbers,” or, “The Italian Lotto,” as it was called, was a lottery played for tiny amounts of money. If you wanted to play you’d pick three numbers, pay as little as a few pennies, and hope that your three numbers were the ones that were randomly picked to pay off.
There are two big differences between state lotteries and the numbers rackets. One is that the state lottery is taxed. You win, you pay. The second is that the numbers racket operators took 20 percent – 40 percent of the prize pool. The state takes 50 percent. Sometimes it’s hard to tell who the thieves are.
Go to the pharmacy with a prescription and you have a choice: Buy the expensive, brand name drugs you were prescribed, or get what seems like a huge discount for the generic stuff. This same dichotomy is echoed in retailers in every segment of the economy. You can get expensive, brand-name jeans or inexpensive, off-brand jeans. Or coffee. Or handbags. Or over-the-counter laxatives, makeup, pasta or anything else. But the big deal is fashion
In many cases the only difference between the name brand and the generic is the packaging and the name. The difference, for example, between WalMart’s store brand milk of magnesium and Philipps brand (besides the price) is the bottle. That’s the only difference. I should know, I once worked at a factory that manufactured and packaged them both. They came out of exactly the same vat. The line workers just paused to change bottles and boxes.
The funny thing is that if we had taken one of the bottles destined for WalMart and labeled it as Philipps, we’d have been breaking a federal law. Why? Because the markup on name brand goods is huge and the ingredients are the same as is in the cheap stuff. It’s like taking a milkshake from McDonalds, putting it in a crystal glass and selling it at the Waldorf Astoria across the street.
By far the best generics market is fashion. The same twenty cents of denim goes into Levis as goes into Marshall’s jeans. But Levis cost a ton more. When a Costa Rican factory starts making jeans for Levis, they’ve hit the jackpot. And there’s nothing wrong with that, either. They barely have to change their process. Maybe add one more rivet to some of their designs and suddenly they’re exporting ten times as much. But the store is the real big winner. They’re selling you fifty cents worth of jeans for $50 instead of $20. Sound like a crime?
The Criminal Version
The criminal version of this is knock-off fashion. You may think that this only happens on folding tables outside low income strip malls, but the fact is that falsely labeled goods have always and likely will always be bought and sold by big department stores as well, knowingly or unknowingly.
It used to be that big name fashion meant higher quality wares, and selling someone a counterfeit bag or pair of pants or jacket was capitalizing on the designer’s label while giving them inferior goods. People generally knew when they were buying knockoffs. They just didn’t care. They wanted to pay less and look good. Now the only real difference between designer and off-brand is very often the label, but it’s still illegal for you to take a Chanel label and stick it on your home-sewn bag and sell it. It’s also illegal for sweatshop owners to do the same thing.
And we all know how moral sweatshop owners are.
The difference is that legal sweatshops operate with some semblance of oversight, while illegal sweatshops are essentially slave camps.
Selling Overly-Powerful Drugs
Interesting fact: The size of the illegal drug trade and the legal pharmaceutical market tend to be equivalent year to year.
Pharmaceuticals are one of the big worldwide powerhouse industries. Any problem you have, there’s a drug for it. And virtually every one of the popular illegal drugs currently vilified – justly or unjustly – went through the same biography.
First they were considered a miracle, a cure-all, and something that felt good, too! Then they were considered too powerful to go unregulated, and became prescription-only. And then they became the demons of reality. Evil, horrible, destructive chemicals good only for murdering their abusers. This has been true of cocaine (beloved of Darwin and Freud), heroin (a Bayer trademark!) and even Marijuana (said to cause Mexicans to go on murderous rampages). But for every one of the big name schedule 1 substances, there is a legal version.
Cocaine is used as the only suitable topical anesthetic for eye surgery. The only difference between Oxycontin and heroin is the purity and where it’s manufactured. Cannabis is used in bird food. The list goes on and on, and includes methamphetamine and MDMA.
The Illegal Version
Pharmaceutical companies are well aware of the addictive, unhealthy qualities of opiates and have been criticized for introducing what is essentially legal heroin to poor communities. Oxycontin, for example, was marketed by Purdue Pharmaceutical as being less addictive than similar drugs. This was patently false. But it did get the drug into the hands of millions of soon-to-be addicts throughout the USA. Who can blame Purdue? They were just following a tried and true marketing strategy that has worked for drugs for a long time: Give people a cheaper, better high and let them come to you.
The Lucas Brothers, led by the eldest, Frank, became the Heroin kings of New York, and Frank himself made about $1 million dollars a day selling white powder. And he sold it to the resellers, just like Purdue sells Oxycontin to pharmacies. Frank, however, did the exact opposite as Purdue. Instead of marketing his brand – Blue Magic – as cheaper and less addictive, he released the first batch of every new package almost completely pure. A few junkies would overdose and the word would spread – through word of mouth and the newspaper – that his drugs were stronger than the competition. Soon the users would be lining up around the block to get high enough to die.
The big differences between pharmaceutical companies and illegal narcotics operations are:
a. Pharmaceutical companies pay taxes.
b. Pharmaceutical companies have better quality control.
c. Pharmaceutical companies tend not to engage in violent crime.
All around the world, the best clubs are members only, but the very best, most elite clubs take things to a whole ‘nother level. They’re secret clubs. Clubs without signs, sometimes without names, hidden in plain sight and if you don’t know the location and the password you just can’t get in. Secrets are the very essence of cool, and everyone who goes out to clubs wants to be at the coolest one.
Now, obviously, you can’t be doing big business if you only let in a select few people and don’t even let the public know where you operate. Most clubs operate on a less extreme level of the same philosophy: keep what’s inside semi-secret, make it hard to get in, and everyone will clamor for the chance to peek onto the other side of the velvet rope. And why not? It’s $20 beer night.
The Illegal Version
A speakeasy is a prohibition-era club you didn’t talk about. Hence, “speak easy,” and be careful who you tip off. Prohibition didn’t stop a single person who wouldn’t be drinking anyway from imbibing alcohol. It just drove it underground and made it a pseudo-secret. A speakeasy was sort of the fight club of drinking. Rule number one, you don’t talk about it. And just like fight club, every time you showed up, you were likely to find more people. The most famous speaks were the preferred drinking establishments of cops, politicians, and influential business figures.
To get into a speak you had to go through an incredibly complex and dangerous initiation ritual known as knocking on the door. That was it. You’re in, have fun.
It’s becoming popular these days to call all sorts of meetings speakeasys. It denotes that you want the marketing to be done word of mouth. That you’re cool, edgy. Have a pizza speakeasy to show off your upcoming restaurant opening’s new approach. Have a downtown speakeasy to showcase your band. But the real speak of the modern day is the barn or warehouse party in an abandoned building where, this era’s prohibited chemicals are in abundance.
Casinos are one of the best businesses a company can take part in. As long as there are people walking in the door the venue is virtually guaranteed to make money. How much money? Well, think of it this way – a casino is the only entertainment venue in the world where you can get unlimited free food and drinks just so long as you promise to relax and have a good time.
This generosity is, to state the obvious, not because the casino likes to give things away. It is because they know that every second you spend in the place you have an expected loss of money that they get – even if you’re winning money at that very moment. Those free drinks are the most expensive complimentary beverages you can ever have.
The Illegal Version
The illegal version of a casino is… an illegal casino. States such as Texas and New York, where some popular forms of gambling, such as poker, are illegal, have long been host to underground card rooms and shadowy casinos run by even shadowier figures.
Remember, in every state that gambling is now legal and regulated, it was once illegal. That is, it was illegal for the organizer of a place where gambling took place to profit off that gambling except by winning the game. In other words, the house got no cut. Just like with booze, making it illegal to do something as profitable as take a percentage of a gambling house’s income just made it a business only those who would flout the law would take part in.
You know the old stereotypes about casino owners breaking the legs of gambling cheats and card sharks? Those come from the places run by organized crime figures and organizations. But, generally, you were much more genially treated and safer at an underground club than at a family owned Vegas casino. The last thing an illegal club wants is attention.
These days, underground poker rooms are a little more out in the open, sort of an open secret. Gambling in the home is illegal, but as long as nobody’s getting fleeced or having their thumbs cut off, what’s the harm. Back in the day, though, when an underground casino was big business – that is, before the corporations got in on the action – it was a sophisticated operation with everything from roulette to baccarat. Gamblers didn’t have any other recourse if they wanted to stay in the country and have a little fun.
One big difference is that an illegal club tends to have a smaller clientele. That means they pamper their guests a little more lavishly. The freebies will be top shelf and the servers will be much more accommodating. The atmosphere is usually more informal and the game is often taken much more seriously. Another big difference is that you will be paying a lot more for the privilege to play, often even to get in the door.