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they settle their differences using violence, which in the world of drugs is the only way to enforce contracts.
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Welcome to The Art of Charm.
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I m your host, Jordan Harbinger.
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Today we re talking with Tom Wainwright, author of Narconomics.
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He s a writer at The Economist, and we re looking at the parallels between drug cartels and regular businesses.
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I realize this episode has a much more tenuous nexus to psychology and other AOC-related concepts.
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I just found the information in the book so interesting and compelling that I wanted to do a show on it.
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So this one is a lot less actionable than usual, but it will get you thinking.
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You should listen to this episode if you re interested in how ideas of economics and business apply to any entrepreneurial or business venture, how cartels engage in corporate social responsibility, branding, and even PR campaigns, how cartels franchise, regulate labor, branch out online,
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and even diversify into markets that produce and transport products that we all consume in our daily lives.
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This is a bit of a divergence in our usual fare, but in my opinion, one that s really interesting.
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So enjoy this one with Tom Wainwright.
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And by the way, if you re new to the show, we d love to send you some top episodes and the Art of Charm toolbox where we discuss things like body language, nonverbal communication, persuasion, networking, negotiation, mentorship,
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Everything else we teach here at The Art of Charm.
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If you re in the USA, you can text charmed, that s C-H-A-R-M-E-D, to 33444.
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Everywhere else, you could just go to theartofcharm.com.
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Also, at theartofcharm.com slash podcast, you can find the full show notes for this and all previous episodes.
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Alright, here s Tom Wainwright.
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Tom, this is interesting because I heard the title of the book and I thought, alright, timing s good, right, because we re all fresh off Narcos season two, and I thought, wow, economics and drugs, where do I sign up?
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I mean, it sounds just like college for me, sort of.
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And you ve done a really interesting book here.
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You wore a GPS device to meeting with a drug cartel leader and it didn t work.
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So that was kind of what hooked me into this, and I thought, this guy, this guy s crazy.
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This is the craziest economist
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that I ve ever heard of, because economics, generally a field not known for its wild child type of outlook.
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How did you get interested in drugs?
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Well, I got sent out to Mexico in 2010 with The Economist, and you re right, this wasn t kind of natural territory for me.
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It wasn t the kind of story that I was expecting to follow, but I got there, and it was just at the time that the drug war in Mexico was really taking off, and the murder rate there was
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going through the roof, and I ve been expecting to write stories about regular kinds of business.
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I thought I d be writing about the car industry there or tourism, that kind of thing.
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But I arrived and found very quickly that the only thing people really were interested in talking about was a different kind of business, namely the drugs business.
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So i found myself writing a lot about it and the more i did the more i covered this industry and the more i spoke to the people involved in it whether they were the cartel leaders of the traffickers of the consumers or the rest, the more i realize that actually this business was really a business like any other.
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it had various things in common with other kinds of business.
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So I started thinking, well, what would it be like if we wrote about the drugs business as a business?
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Because most of the coverage that you read in the newspapers and the items that you see on the TV about the drug war, treat it as a war or as a crime, you know, and the coverage is very dramatic.
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But I thought, how would it be if we wrote about these cartels as if they were ordinary companies and analyzed them in that way?
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What would we learn?
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So I started doing that and gradually found that if you do think of them as being companies, then you learn one or two things about them that perhaps wouldn t previously have been obvious.
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Why do you think the coverage is just based on the criminal element of it?
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Do you think it s just that we re addicted to drama and that s more exciting or is there something else going on?
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I think the drama is definitely a part of it.
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I mean, when a Mexican cartel goes and rolls five severed heads onto a disco floor in Michoacán, it s sort of an unavoidably dramatic thing.
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And it doesn t surprise me that that s the detail that journalists go for.
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we re just not used to thinking of it as being a business partly because also I mean a very obvious point to make but you know the very fact that it s illegal means that we re not accustomed to thinking about these organizations as being like companies and obviously they don t file annual accounts you know and they don t give press conferences and so on so covering them as businesses isn t completely straightforward by any means so I think our whole sort of culture is geared towards
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writing about the drug war as a sort of dramatic, criminal thing.
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And it is all of those things.
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I m not trying to claim that it s not criminal and that it s not immoral.
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I think it s both of those things.
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But my argument is just that, really, if we want to defeat these guys, we ve got to understand how they work.
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And the key to understanding how they work is recognizing what they are, and that is profit-motivated businesses.
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So that s the sort of key thing that we ve got to bear in mind when we write about them.
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And until now, I think we ve failed to do that.
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Our coverage of cartels has been very, very sort of black and white, and it hasn t bothered to look very closely at the numbers behind the business, hasn t bothered to look very closely at the real motivations of these guys.
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We write about them as if they re purely motivated by a kind of bloodlust.
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And there is some of that, but above all, what makes these guys tick is money.
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And if you follow that, then you understand more where they re coming from and what they might do next.
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Yeah, exactly, we gotta hit him in the wallet, for sure, because to get rid of anything like this, we can t really treat the symptoms, which are people who ve already been affected after a lifetime of using this stuff, or years of using this stuff, we gotta get to the real reasons that this is happening, and economics is interesting, and correct me where I m wrong, because you re an economist and I am not, I have an undergraduate degree,
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that included some classes in this, so you re slightly more qualified than me, but economics is more or less a science, right?
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There s a lot of numbers.
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Sure, you can spin them in whatever way that you want, just like science, but on the other hand, it s really hard for the actual data to lie, right?
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Because if you re looking at things through,
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an eye that tries to mitigate bias as much as possible, you end up with a certain set of conclusions that I would imagine most economists would agree with.
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So this is an interesting take on this subject because it s not done for political reasons, it s not done for moral reasons, this is just here s what s happening with the numbers, here s how the numbers can be corrected in order to correct the problem that we re facing, and that s what you sought to take a look at with this book from my view of it.
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Well, I guess that s part of it, yeah.
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I mean, you ve always got to be a little bit careful with statistics and numbers because, of course, people can and do lie with statistics and numbers.
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You know, you can use them in a misleading way, and statistics to do with the drugs business are no different in that sense.
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But I think that if you do apply the numbers properly, then you do bring a kind of rigor to the analysis that sometimes is lacking.
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And people often just don t use the right numbers.
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I ll give you one example.
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Just soon after I arrived in Mexico,
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There was this event when the Mexican armed forces had just made a huge seizure of marijuana on the edge of Tijuana.
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It was about 100 tons of the stuff and it was widely reported that this was all worth about half a billion dollars.
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And this struck me as a huge, huge amount of money, and so I had a look at how they d done it.
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And what they d done was they d taken the retail price of cannabis in the United States, and they d gone for a kind of conservative estimate of $5 a gram.
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And they d multiplied this out over 100 tons, and arrived at this figure of half a billion dollars.
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And that sounds perfectly sensible, and you might think, okay, that s a kind of economic approach.
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But if you apply that to any other business, it s clear that that s a crazy thing to do.
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Imagine if you did that, say, with coffee.
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And you said okay here we ve got a kilo of coffee in columbia how much is that worth well a cup of coffee in starbucks in the united states costs two or three dollars and in there you get a couple grams of coffee so let s say it s about dollar a gram,
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Therefore, a kilo of coffee in Colombia is worth $1,000?
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No, right?
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I mean, that s fairly obviously wrong.
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And yet, that s exactly what we do with drugs.
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We constantly do this thing of calculating the price of drugs seized in Mexico using retail prices in the States or in Europe.
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And that s why we get these very, very inflated numbers.
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And it just made me think, that s just one example, but it made me think, if we re getting basic stuff like that wrong,
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what else are we getting wrong in our understanding of the war on drugs?
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And where else are we overestimating the effectiveness of our current policies?
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So I think bringing some numerical insight and applying statistics and so on is important, but you ve got to use the right ones.
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And part of the argument of my book is that at the moment we re using numbers in a kind of innumerate way that would really stand out if this were any other business.
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But we tolerate it because in the war on drugs, we re not used to thinking about this as a real business.
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Right, we re used to looking at the propaganda involved on both sides.
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And that makes sense, right?
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So instead of looking at the street value of a drug haul, we have to look way down the supply chain and look at where this is created and what it s worth over there.
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And I recall from the book that you d written
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something that actually surprised me quite a bit, which is that cocaine s not any more valuable than coffee at its source, but law enforcement costs, smuggling, criminal organizations, that kind of thing, that raises the price by 30,000% once it gets to the United States.
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When we re looking at the raw material itself, it s not worth much more than any other crop that you could grow in the exact same place.
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And that s because it is just a plant.
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The coca bush, which is the main ingredient of cocaine, is pretty easy to grow.
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And if you go down to South America, as I did, and go to the places where they re growing it, you can see that it s just an ordinary cash crop.
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And you re right, it s not worth very much at all.
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To make a kilo of pure cocaine powder, you need about a ton of fresh coca leaf.
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And in Columbia, for instance, that turn is worth probably about $500 or thereabouts, which is nothing.
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And of course, by the time that kilo of cocaine makes it to the United States, it s worth probably more than $100,000.
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there s a huge, huge increase in the price of the stuff as it makes its way along the supply chain.
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That leads us to an important insight, which is that at the moment, a lot of our efforts to stop the supply of cocaine are focused at the very beginning of the supply chain.
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And that kind of sounds sensible, you know, nipping the thing in the bud sounds as if it makes sense, you know, going really early on and stopping the thing at its source sounds like a sensible policy.
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But it doesn t really make sense, because if you consider the increase in the price of the thing as it makes its way along the supply chain,
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Interrupting it early on means that you re not really hitting the cartels very hard at all.
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Let s say you manage to double the cost of growing coca leaf in Colombia by spraying weed killer on the crops, by uprooting it and doing all these other things that they do.
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You re going to double the cost of the coca leaf from, say, $500 a ton to $1,000 a ton.
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But if you pass that increase in price onto the final product, you re only increasing the price of a kilo of cocaine from, say, $100,000 to $100,500, i.e.
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you re hardly doing anything.
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And the comparison that I make in the book, imagine if you re trying to increase the price of paintings, works of art, and you say to yourself, okay, the main ingredient in a painting is paint.
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And so what we re gonna do is we re going to try to drive up the cost of a box of paints from $50 to $100.
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And we hope on that basis that we re going to double the price of this million dollar painting to two million dollars.
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Fairly obviously that s ridiculous, right?
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Even if the artist did pass on that increase in the price of paint to the buyer, you know, you d be talking about a difference of $50.
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And that s exactly what we re doing with the cocaine business.
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We re trying to drive up the price of coca leaf, hoping that this will have a dramatic impact on the price of cocaine in the States or in Europe.
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And it s not.
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And when you just look at the economics of it, it s not remotely surprising that this is failing.
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So my argument is, if you look at the numbers, it s clear that we re focusing our efforts really in the wrong place.
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This is a huge bummer because what this essentially means is that all of our interdiction efforts that happened before the U.S.
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border are not doing nearly as much as we would like them to do because cocaine, again, is not that valuable until it gets to the U.S.
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border, right?
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So we almost have to wait until it gets right there and then go, oh, we got everything.
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Right, and that s really hard to do.
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It s kind of like if you re playing a game where you have to catch a ball, it s like saying, well, I need to catch the ball right at the peak of the arc instead of where it lands, which is really, really, really, really hard to do.
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You d have to time it, and basically I would say almost impossible to try to do that every time reliably.
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So we can t hit supply is the conclusion here.
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We have to hit demand.
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Well, I m not saying you can t hit supply at all, but yeah, I think if you re gonna focus your limited resources in one area, then yeah, it makes more sense to focus on demand.
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You get more bang for your buck, if you like, if you focus on the demand side of things.
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And on supply, I mean, the people who are involved in this, they re brave people doing good work, and earlier you mentioned the show Narcos, you know, you watch that and you see the incredible risks that service people, both Americans and Colombians, take in order to try and stop these guys.
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You know, I admire them for what they re doing,
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I do think that they re focusing their efforts in the wrong place, because as you say, if you try to interrupt supply, you re gonna find that if you do it early in the chain, you have very little effect.
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And if you do it late in the chain, you ll have more of an impact, but by that stage, it s very, very difficult, because by the time the product makes its way to the States, it s dispersed into tiny quantities of just a few grams here and there.
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And you can lock up those dealers, but by then, you know, if you try and lock up every dealer who s shifting a gram or two of cocaine,
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you re going to end up locking up a very, very large number of people, which indeed is exactly what has happened in the US.
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So for those reasons, yeah, I think the demand side is where to focus our efforts.
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And if you spend the money on trying to reduce demand for these drugs by educating young people to take fewer drugs, to treat addicts so that they can reduce their consumption,
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you do end up having a much bigger impact.
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And there are all kinds of studies that prove this.
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There was one that was done a few years ago which compared the impact of spending a million dollars at different points in the supply chain.
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And I believe the impact they calculated of spending a million dollars on intercepting cocaine in South America was a reduction in the amount consumed in the States of about 10 kilos or thereabouts.
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And if you spend that million dollars instead on treating addicts in the States,
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you can reduce the amount consumed by about 100 kilos.
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So you get 10 times more for your money than you would otherwise.
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And this is taxpayers  money.
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It s tax dollars and tax euros and tax pounds that are being wasted flying helicopters around in Colombia, when we could be spending that money doing other stuff, which would actually do more and is proven to do more.
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So the demand side, i.e.
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focusing on the consumers, is where we should be focusing not so much on the supply side, i.e.
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chasing people around in Colombia.
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So if the price of coca, for example, is the same as coffee at its source, why don t farmers in Bolivia and Mexico grow coffee instead of coca?
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Because they can make more by selling it to the cartels.
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It s still worth a fair bit more than coffee.
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It s very, very cheap compared with what it eventually fetches in the United States or in Europe.
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but the price that they can get is somewhat higher than coffee.
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There isn t a huge, huge difference.
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I remember I spoke to a guy in Bolivia who grew this stuff, who grew coca leaf, and I said, well, look, why don t you do other stuff?
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There are loads of crops out there that you could grow.
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And he said, well, you know, raising chickens was something that he d be interested in doing, but he didn t have the money to start up a chicken business, and he said that overall he wouldn t make quite as much.
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And there are various programs that go on there in South America.
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designed to try to get farmers to grow other stuff.
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So the European Union sponsors something to try to get farmers to grow tomatoes instead, or tomatoes, as you might say.
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And similarly, in countries like Afghanistan, there are programs to try to get opium farmers to grow other stuff.
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And I think that s probably, you know, it s a more humane way to go about things than spraying their crops with weed killer and uprooting them.
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Trouble is, though, you find that it s pretty easy for the cartels actually to just offer a slightly higher price again for the coca because the profits involved in the coca leaf are so, so great that it s pretty easy for the cartels to up the price that they bid.
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Ultimately, I think trying to outprice or outbid the cartels and get farmers onto growing other crops, it may be a better way of going about things than spraying coca leaf with weed killer, but it s pretty tough because the markup involved in the drugs business is such.
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that the cartels can outbid pretty much any other crop that you try to direct farmers to.
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So again, I think the supply side trying to fix things in Colombia at the source of the problem, though it sounds very sensible, actually the evidence is that it has a pretty limited effect.
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Right, and of course the demand for this that creates all the profit creates new technology and ways to grow things like that just because there is a push on that side.
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It s almost like they re getting subsidies at some level, right?
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I mean, there s a lot of people who know what they re doing being hired down there to help grow this stuff that aren t just farmers.
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There s experts helping people grow even more, making it more resilient, hiding it from the air and making it
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grow fast, all these different things that you get when a crop is actually worth money are now happening with coca down there.
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So it really does sound like a losing battle.
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And I think everybody knows that we are losing the war on drugs, at least from this end as well.
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It s really disturbing to me that you end up with essentially what are like the Mexican Navy SEAL type forces, the Zetas,
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going and starting essentially a wing of a cartel that becomes a cartel in itself, and you end up with these crazy pseudo-legendary figures like El Chapo, who s escaped from prison multiple times and sounds like something out of a television drama that ran out of storylines.
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Ah, let s just have him escape from prison again.
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Ah, let s have him escape again.
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It s ludicrous, and the popularity of shows like Narcos are bringing more attention to this subject.
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By the way, when you are interviewing farmers and people involved in the drug trade, do you speak Spanish or do you have a translator?
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I speak Spanish with them on the whole.
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I mean, it s funny, some of them actually have spent a lot of time in the States.
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One guy that I was interviewing in a prison in San Salvador, we were speaking in Spanish, and then he referred to the fact that he d lived for many years in Los Angeles, and so his English was probably much better than my Spanish.
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But no, usually I spoke with them in Spanish.
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That s the easiest way on the whole to communicate with people down there.
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Yeah, I figured.
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I was just wondering if you had a translator because that s a job that I don t know if I would pick up if I saw an ad for it.
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I don t know.
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It d be interesting.
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You d get some interesting vocabulary, wouldn t you?
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When I arrived in Mexico, my Spanish was pretty limited and I gradually learned a bit more.
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And the kind of words that you learn are intriguing, you know, words for people who are found locked in the trunks of cars and people who ve been shot with machine guns and that kind of thing.
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So the vocab was kind of different to what I d learned in England.
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But yeah, interesting stuff.
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Wait, what are these words?
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You can t leave us hanging on this.
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There s different names for people that have been found locked in the trunk of a car?
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They just have a term for that?
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Oh, God, yeah.
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No, you re asking me now.
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Sorry.
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It s a few years since I ve been out of Mexico, so I can t remember what it was.
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There was a particular word
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that are used for people who were found in the boots of cars, people who, different words for people who ve been executed in different ways, you know, people who ve been just wrapped in tape to suffocate them, there s slang terms for all of these different forms of execution which are very unpleasant.
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That s really gross though, it s almost like they re doing it so much they need a shorthand for this, that s really disturbing.
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Yeah, it has a vocabulary all of its own and it s pretty grim stuff.
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Yeah, it was a bit of a change from my usual kind of work in London.
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I think they were kind of intrigued by the whole project.
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My wife was very good at kind of tracking my whereabouts using this GPS thing and I d check in with her now and again and let her know that I was still alive.
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It was interesting, you know, I d kind of roam around all these bits of Mexico and Central America and South America, meeting these interesting guys and getting interviews that weren t really
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Exactly like the kind of interviews that i ve been doing before but you know when you speak to these guys about the businesses that they run the companies that they run.
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Some of the things they say do kind of echo the comments that you hear from middle managers in other companies.
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You know, they all like to complain about their employees in the way that managers always do.
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They complain about the treatment they get from the government, although we re talking about slightly different kind of complaints from the ones that ordinary firms might have.
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But yeah, it was a kind of exciting role to have.
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I guess it was pretty frightening sometimes going to places like Ciudad Juarez and places like San Salvador, where the level of violence is extremely high, but
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i guess one thing i d always remind was that the real high risks are really faced by the mexican journalist that the ones who often a place that greatest risk because that the ones who actually have to live in the city s permanently you know i was based in mexico city so i d fly into the white wires and do my interviews and
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then make sure that I was on the flight back.
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I think it s a different situation for the local journalists who live in these cities and have to report on crimes.
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And the people they re writing about very often know where they live and where their families live.
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And the levels of violence against Mexican journalists are really through the roof.
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So the kinds of risks taken by foreign journalists like me really are nothing compared with the ones faced by local reporters.
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All right, back to the show.
2
SPEAKER_01
A friend of mine a while ago, who s a writer, was doing something about the cartels as well, and one of the journalists that he was working with had to disappear, and so he asked me to connect him with certain people who can make that happen, and it s very tough.
2
SPEAKER_01
It s very tough to get somebody out of a country without anybody knowing, surprisingly.
2
SPEAKER_01
You would think, oh, everybody gets across this porous border.
2
SPEAKER_01
It s really hard when the people looking for you are the people that run people across the border.
2
SPEAKER_01
It s really, really hard.
2
SPEAKER_03
Oh, absolutely, yeah.
2
SPEAKER_03
I d be fascinated to hear how you did that, because it s not easy to move people around in that way.
2
SPEAKER_01
You know, we did it through the Darien Gap, you know what that is?
2
SPEAKER_01
Oh, seriously?
2
SPEAKER_01
Wow.
2
SPEAKER_03
Yeah.
2
SPEAKER_01
You picked a difficult one.
2
SPEAKER_01
Yeah, well, we figured that it was probably one of the best ways for him to disappear without dying, but then also had a high risk in and of itself.
2
SPEAKER_01
But it was kind of like, do you want to jump off this five-story building, or do you want to swim across this shark-infested bay?
2
SPEAKER_01
Like, it was just one of those kind of situations for this guy.
2
SPEAKER_01
But Ciudad Juarez, where you were, is dangerous because it s one of the gateways for drugs to the US.
2
SPEAKER_01
70% of traffic is what you d estimated, and at one point had the highest murder rate in the world.
2
SPEAKER_01
And so you re kind of hanging out here.
2
SPEAKER_01
Where are you conducting these interviews?
2
SPEAKER_01
I m interested.
2
SPEAKER_03
It depends on really on the person, but in Juarez, I remember speaking to, let s see, business people who had had problems with the cartels.
2
SPEAKER_03
I mean, that was one of the most interesting sources actually of interviewees.
2
SPEAKER_03
You know, the extortion business in Juarez was a big deal when I was there because at the time there was a big, big battle going on between the local Juarez cartel and the Sinaloa cartel, which at the time was trying to take over the city there.
2
SPEAKER_03
And in order to raise funds for the battle that they were having between each other,
2
SPEAKER_03
both cartels were levying what they call a piso, a kind of extortion money on local firms.
2
SPEAKER_03
So often I would speak to business people in their places of business, you know, it could be bars or wherever, shops, and I speak to people there.
2
SPEAKER_03
Who else?
2
SPEAKER_03
I spoke to government people in their offices, police officers.
2
SPEAKER_03
I went to kind of community projects in some of the slums there.
2
SPEAKER_03
It s not a completely safe city to be in, but I thought that, you know, the main thing that I tried to do was just to stay off the streets most of the time and go from appointment to appointment and stay inside rather than just kind of strolling aimlessly around looking like a tourist.
2
SPEAKER_03
So I tried to make sure that I had a pretty full diary and go from appointment to appointment.
2
SPEAKER_01
Yeah, I mean, the violence that you described there is so vicious.
2
SPEAKER_01
It was the stuff of nightmares, really.
2
SPEAKER_01
There s no getting around it.
2
SPEAKER_01
Do you ever think about this stuff and kind of wake up with a shiver?
2
SPEAKER_01
Some of the stuff you write about is, is really graphic and gross.
2
SPEAKER_01
Yeah, it s pretty grotesque.
2
SPEAKER_01
I guess not.
2
SPEAKER_03
No, I tend to sleep reasonably well, to be honest.
2
SPEAKER_03
I think part of the thing that appealed to me about writing about the cartels in the way that I did, you know, as an economist or as a business journalist was that you can kind of get around the drama of it and just
2
SPEAKER_03
boiled the business down to its basics.
2
SPEAKER_03
There s always so much emphasis on the drama and on the kind of gruesome details.
2
SPEAKER_03
And if you get completely lost in that, then I think you can lose sight of the more important points.
2
SPEAKER_03
But yeah, you re right.
2
SPEAKER_03
I mean, there s no getting away from it.
2
SPEAKER_03
The kind of levels of violence out there are just excruciating.
2
SPEAKER_03
When you see videos of the sort that ISIS, Islamic State put out now, some of that stuff is nothing compared with what s going on
2
SPEAKER_03
in Mexico and what s being funded by people who buy drugs in my country and in yours.
2
SPEAKER_01
One of the things that I read in your book was something about Kiki, the federal agent that is referenced actually in the beginning of Narcos where they said, Kiki died for all of us.
2
SPEAKER_01
And I was like, what does that mean?
2
SPEAKER_01
So I looked it up.
2
SPEAKER_01
We ll link to it in the show notes, but don t read it if you are sensitive because you just can t stop thinking about
2
SPEAKER_01
how gross what they did to this federal agent was.
2
SPEAKER_01
It s just like, it s really, it s inhuman at every level.
2
SPEAKER_01
Really kind of insane.
2
SPEAKER_01
And so what, yeah, when you re this close to it, it just seems terrifying.
2
SPEAKER_01
But I understand that, you know, you re looking at this drug cartels, they re global conglomerates, they re massive businesses.
2
SPEAKER_01
In fact, you d written that cartels would be one of the top 40 countries in terms of economics if they were a country instead of a business, right?
2
SPEAKER_01
So we re talking like Walmart style.
2
SPEAKER_03
Yeah, absolutely.
2
SPEAKER_03
Business is very opaque, obviously, by its nature.
2
SPEAKER_03
But the UN reckons that worldwide every year it s worth something like $300 billion a year.
2
SPEAKER_03
So in country economy terms, I think it would be just ahead of Israel, you know, if the drugs business were a country.
2
SPEAKER_03
It s a pretty serious economy.
2
SPEAKER_03
They really use that economic power.
2
SPEAKER_03
And if you look at some of the countries where they operate, particularly ones in Central America, where in many cases the state, the government is very, very weak.
2
SPEAKER_03
the cartels just have the upper hand.
2
SPEAKER_03
And I remember going to interview the security minister in Belize, which is this tiny, tiny country with a population of, I think it has about 400,000 people.
2
SPEAKER_03
So, you know, it s really, really small.
2
SPEAKER_03
And at the time, Belize, the government of Belize didn t own a single helicopter between them.
2
SPEAKER_03
And they re up against these cartels, which have not only helicopters, but they ve got their own primitive submarines.
2
SPEAKER_03
They, you
3
SPEAKER_00
they ve got sort of basic tanks, they ve got all kinds of things, and their power to outgun and outspend governments in that part of the world is immense, and their power to corrupt as well, and they do a lot of work corrupting police officers and soldiers, and in many cases even corrupting senior members of the government.
3
SPEAKER_00
Mexico some years back discovered that the guy who they named their drugs czar, the main guy fighting the cartels, was in fact himself working for one of the cartels,
3
SPEAKER_00
And when you see the profits that these cartels make, it s not surprising that they have the budget to bribe these guys, even at the very highest levels.
3
SPEAKER_00
So we re really facing a very, very serious adversary.
3
SPEAKER_00
And at the moment, I worry that we re not doing a terribly good job of beating them.
3
SPEAKER_01
Yeah, it s terrifying.
3
SPEAKER_01
It really is.
3
SPEAKER_01
And looking at some of the same problems that cartels have, you re looking at some of the same problems entrepreneurs have, multinational businesses have.
3
SPEAKER_01
I d love to explore some of the parallels that we see here.
3
SPEAKER_01
Because yes, we have things like
3
SPEAKER_01
systematic police murder, which is sort of like dealing with a regulatory agency, which is kind of a weird way to sugarcoat that, but cartels even do things like PR campaigns, and it s just really, really interesting to see how the problems have to be handled in the same way.
3
SPEAKER_01
Let s talk about the PR.
3
SPEAKER_01
I mean, this is something that I was really surprised by, that cartels are campaigning with locals, doing PR to get local villages and cities to support one cartel over another, typically by painting one as worse or more criminal than the other, which...
3
SPEAKER_01
To me, that just was too meta.
3
SPEAKER_01
I had to wrap my head around that, and it took a second.
3
SPEAKER_01
And you end up with other cartels naming themselves things like the Autodefensas, which is basically like the Self-Defense Brigade, and they re supposed to be this anti-cartel militia, and they re a freaking trafficking organization.
3
SPEAKER_00
Yeah, yeah, no, I mean, the hypocrisy is just incredible.
3
SPEAKER_00
But you re right, they do go in for these
3
SPEAKER_00
surprising PR exercises.
3
SPEAKER_00
You wouldn t have thought that public relations was high on the list of priorities for a drug cartel, but actually, they do seem to take it very seriously.
3
SPEAKER_00
In northern Mexico, sometimes these signs appear often hung up from freeway bridges, accusing other cartels of being very immoral.
3
SPEAKER_00
It will say something like, El Chapo never kidnaps people.
3
SPEAKER_00
He just is involved in the drug trade.
3
SPEAKER_00
He never commits violence against others and that kind of thing.
3
SPEAKER_00
Of course, it s total rubbish, but it helps to persuade
3
SPEAKER_00
some people that, you know, one cartel is better or worse than the other.
3
SPEAKER_00
I think the kind of height of this PR activity is a form of what really looks like corporate social responsibility.
3
SPEAKER_00
And it sounds crazy.
3
SPEAKER_00
But again, if you watch that show Narcos, or if you read about Pablo Escobar, one of the interesting
3
SPEAKER_00
despite the fact that he brought stunning levels of violence to Colombia, he remained in many areas a popular figure.
3
SPEAKER_00
His funeral was attended by thousands of people, and it was because he sprinkled a few pesos here and there on community projects.
3
SPEAKER_00
He paid for housing projects, he paid for sports facilities, and similar things go on now in Mexico.
3
SPEAKER_00
In Mexico, there s occasionally you find churches which have plaques on the outside saying this church
3
SPEAKER_00
kindly constructed with funds from Senor So-and-so, and it turns out Senor So-and-so is the leader of a drug cartel.
3
SPEAKER_00
And these guys, by spending their money here and there, they manage to secure a kind of basic level of support among the public.
3
SPEAKER_00
And without that basic level of support, it s much harder for them to remain at large, because the police rely on the public to give them tips, to let them know where these guys are.
3
SPEAKER_00
And the cartel kingpins, in fact, manage to stay at large
3
SPEAKER_00
through a mixture of admittedly plenty of intimidation.
3
SPEAKER_00
That s one reason people don t report them.
3
SPEAKER_00
But it s also because they do have genuine support in some areas because they spend their money on the community.
3
SPEAKER_00
They have in some cases in Sinaloa, there s supposedly a primitive form of social security that has been set up by El Chapo s Sinaloa cartel.
3
SPEAKER_00
And so many people there do actually think twice about reporting them.
3
SPEAKER_00
You know, this isn t a country where the government is always as active as it should be in providing opportunities for impoverished people.
3
SPEAKER_00
And so when you ve got a guy who s made a lot of money exporting some product to a foreign country, you know, and he s willing to spend his money on building good stuff in the local community, whether it s a clinic or a school or housing or whatever, some people actually think, well, hang on, you know, are these guys all bad?
3
SPEAKER_00
Should we be reporting them?
3
SPEAKER_00
And so the cartels really put money into this.
3
SPEAKER_00
Corporate social responsibility and public relations is a very, very big deal for them.
3
SPEAKER_00
They take it very seriously.
3
SPEAKER_01
You know, who else does this?
3
SPEAKER_01
Are organizations like Hezbollah, where basically they start to, like you said, build schools, build clinics, and it puts the criminal organization, the mafia, in competition with the state to provide.
3
SPEAKER_01
So it s kind of a genius strategy, because you get cautious acceptance of the local people, especially when the state cannot provide.
3
SPEAKER_01
And of course, the state s busy trying to fight cartels and deal with the criminal element, so they have to divert resources to that.
3
SPEAKER_01
So it s kind of this.
3
SPEAKER_01
cycle that fulfills itself, right?
3
SPEAKER_01
Oh, the state s running out of money because they re fighting criminal gangs.
3
SPEAKER_01
They can t keep schools and other organizations up to snuff.
3
SPEAKER_01
Let me use some of my illicit funds to help build this stadium instead.
3
SPEAKER_01
And now you end up with this putting the people, the common people against the state with respect to this problem, which is a huge obstacle to eradicating this issue in the first place.
3
SPEAKER_01
And it s
3
SPEAKER_01
It s just fascinating to me that cartels are actually brand conscious.
3
SPEAKER_01
It just seems like something that wouldn t be necessary, but if you don t have to intimidate a certain rung of people on the ladder here, you can end up with a base, right?
3
SPEAKER_01
You end up with a base, and those people can protect you.
3
SPEAKER_01
It s kind of an extension of the plata or plomo, which is lead or silver, essentially, which also sounds straight out of narcos, where either you take the bribe and you take the money and you take the benefits, or they just do something horrible to you, like wrap you up in duct tape or whatever it was that you d mentioned earlier.
3
SPEAKER_01
These cartels are also managing their image by making killing and violence either really public or by hiding it and dragging away the bodies, banning the news stories, and I found
3
SPEAKER_01
It s really interesting that the most dangerous time to be outside in Mexico is 5.45 p.m.
3
SPEAKER_01
because they ll often kill random people, cartels will, in an area in order to make the evening news and then promote army crackdowns in the area.
3
SPEAKER_01
Essentially, they do this on rival turf to get public support.
3
SPEAKER_01
eyeballs on how much violence is happening on some rival s turf and then get the government to intervene so that they can get a leg up on a rival cartel.
3
SPEAKER_00
That s exactly right, yeah.
3
SPEAKER_00
It s a clever strategy.
3
SPEAKER_00
Often the cartels do their best to convince the government to act in particular areas effectively so that they can use the government s forces against their own adversaries.
3
SPEAKER_00
And as you say, you often see this phenomenon where a cartel will carry out some extravagant act of violence in another cartel s patch so that they could dump a dozen bodies somewhere in the middle of a busy shopping street or something like that.
3
SPEAKER_00
It s a kind of act of violence that the government just can t ignore.
3
SPEAKER_00
And when they do that, you immediately find a greatly increased presence of soldiers there and federal police.
3
SPEAKER_00
And that makes it much, much harder to do business in that area.
3
SPEAKER_00
They call it heating up the plaza.
3
SPEAKER_00
By that, they mean making it harder for the cartel to
3
SPEAKER_00
carry out its ordinary business transactions on its usual turf.
3
SPEAKER_00
There, I think, there s a lesson for the government in Mexico and other countries, which is that when you see a very big extravagant act of violence carried out, say, on the turf of, let s say, the Zetas, for example,
3
SPEAKER_00
you shouldn t immediately assume that this was done by the Zetas and therefore send a load of soldiers to this area to crack down.
3
SPEAKER_00
You should perhaps assume maybe this act of violence was carried out by the Zetas  arch rivals and maybe you should send your soldiers to the place where they re active instead.
3
SPEAKER_00
That might do more to deter these sorts of very public acts of violence for public consumption.
3
SPEAKER_00
But you re right, it s all part of a strategy that the cartels have
3
SPEAKER_00
to try to direct the state s resources for their own benefits, because if you can make the army go to where you want them to go, then suddenly that s a lot of firepower that you ve got at your disposal absolutely free of charge.
3
SPEAKER_01
Right, exactly, paid for by the taxpayer, unfortunately.
3
SPEAKER_01
Cartels as well control the media message, of course, and a lot of news outlets won t report on certain battles, or they ll make a big deal out of another battle or other violence, and what you end up with is the same thing that happens when media is corrupted or under,
3
SPEAKER_01
central control in other places, which is you end up with social media starting to play a larger role.
3
SPEAKER_01
So there s a city, its name escapes me, from your book, where they use Twitter to keep citizens safe and tell them what s blocked off and where there s ongoing violence because the news outlets are just not reporting on this stuff accurately or in a timely manner because there s cartel influence.
3
SPEAKER_00
That s right.
3
SPEAKER_00
The city you re referring to is Reynosa in the state of Tamaulipas.
3
SPEAKER_00
It s a border city right on the border of the States.
3
SPEAKER_00
And over there, the local press have found that they just can t really report on the drug war at all.
3
SPEAKER_00
They started doing it, but they found that anybody who wrote a story about the local cartel conflicts very quickly found themselves being intimidated or worse.
3
SPEAKER_00
And so what the local government has done there is set up a Twitter account and they just tweet these very sorts of elliptical messages saying, situation of risk in certain zone, you know, don t go here.
3
SPEAKER_00
It s just a very simple way of letting citizens know to avoid particular areas.
3
SPEAKER_00
They don t say in these reports who s fighting who.
3
SPEAKER_00
They don t give details because they ve learned from experience that that upsets the cartels, but they want to give people just a very basic level of understanding of what s going on, so they do it via Twitter.
4
SPEAKER_01
I find also various websites have been set up to provide the kinds of details that ordinary newspapers or TV stations can t or won t provide.
4
SPEAKER_01
I mean, there are various blogs that provide very gruesome details about the latest tit-for-tat killings in the drug war, and that s where people go for their news.
4
SPEAKER_01
Facebook groups are another one.
4
SPEAKER_01
And these places provide a place for people to share stories about the drug war, which are not subject to the kind of censorship
4
SPEAKER_01
the mainstream media have to use and are not subject to the kind of intimidation that the cartels can employ because the very nature of Twitter and Facebook and so on is that it s somewhat easier to retain your anonymity.
4
SPEAKER_01
Although some people have found that they haven t been able to do that and some bloggers who thought they were anonymous have ended up paying the price for that.
4
SPEAKER_01
But it s true, social media is an increasingly important way for people to share information about the war on drugs because the regular media in Mexico has found itself really muzzled by these guys.
4
SPEAKER_00
Well, even El Chapo s kid, didn t he tweet about him hanging out with my dad and then they caught him because of that?
4
SPEAKER_00
What a moron.
4
SPEAKER_01
Well, supposedly, yeah.
4
SPEAKER_01
I mean, some of these children of the narcos have got these extraordinary Twitter accounts where they tweet about their latest Ferraris or their gold-plated guns or whatever.
4
SPEAKER_01
And it is amazing that the level of impunity in some parts of Mexico is such that these guys can
4
SPEAKER_01
really make no pretense about where their money comes from and still get away with it.
4
SPEAKER_00
We found the Twitter account of his son.
4
SPEAKER_00
Let s take a quick two seconds.
4
SPEAKER_00
Ivan Archivaldo Guzman, followers 167,000.
4
SPEAKER_00
And yeah, his cover picture is him with a hat, and then the background is like a bunch of different sports cars.
4
SPEAKER_00
Crappy low-res photo of a bunch of different sports cars.
4
SPEAKER_01
It s usually, he s into cars and kind of very exotic guns as well.
4
SPEAKER_01
You ll probably find some kind of gold-plated guns if you scroll down his feed, and diamond-encrusted weapons.
4
SPEAKER_00
Hanging out with hot chicks at some bar.
4
SPEAKER_00
They clearly live in the campo with no shirts on, jumping up and down.
4
SPEAKER_00
And there s, oh, flying in my helicopter.
4
SPEAKER_00
And then his face blurred out with two random babes.
4
SPEAKER_00
Street racing, hanging out on his plane.
4
SPEAKER_00
Yeah, new Ferrari, you weren t kidding.
4
SPEAKER_00
Him in some boats.
4
SPEAKER_00
And oh yeah, wow, all the car keys of either all his or him and all his friends.
4
SPEAKER_00
And there s Mercedes, Ferrari, Bentley, BMW, Maserati, Lexus, and pretty much everything else.
4
SPEAKER_00
No Tesla though, not into the Tesla yet.
4
SPEAKER_01
No, the charging points are, I think range anxiety is probably a big deal if you live in the desert, so maybe one day.
4
SPEAKER_00
Exactly, if only you could run your car on cocaine.
4
SPEAKER_00
And yeah, here s a gold-plated AK-47 in the driver s seat of a BMW picture.
4
SPEAKER_00
Yeah, and the rest of it is literally just that times 1,000.
4
SPEAKER_00
You can just keep scrolling down and it s all it is.
4
SPEAKER_00
It s just that over and over and over again.
4
SPEAKER_00
Pretty much what you would expect
4
SPEAKER_00
from a guy who owns a nightclub in Miami kind of guy.
4
SPEAKER_01
That s exactly what we re looking at here, yeah.
4
SPEAKER_01
But yeah, that s, I m afraid, the state of play over there at the moment.
4
SPEAKER_00
I mean, you went to jails in El Salvador, interviewed leaders of gangs like Mara Salvatrucha.
4
SPEAKER_00
or 18, or dieciocho, right?
4
SPEAKER_00
I mean, you re talking about the gangs deciding to collude and not kill each other, and the statistics you give are just incredible.
4
SPEAKER_00
70,000 lives lost in the 90s, yet a 10% chance of being murdered in El Salvador, period, plain and simple, and then they decided to collude and not kill each other, and violence falls by 66%.
4
SPEAKER_00
It s crazy.
4
SPEAKER_01
And the change that you referred to, that big drop in the violence,
4
SPEAKER_01
more or less overnight.
4
SPEAKER_01
If you look at a graph showing the number of murders in El Salvador, it wasn t something that happened slowly over time.
4
SPEAKER_01
It was something that literally happened overnight.
4
SPEAKER_01
And the reason was that the two big gangs there, the Mara Salvatrucha and 18th Street Gang, signed an agreement or made an agreement with each other that they would form a kind of ceasefire.
4
SPEAKER_01
And instantly, the level of violence dropped like that.
4
SPEAKER_01
And it just shows how much of the violence these gangs are responsible for.
4
SPEAKER_01
But it also shows that
4
SPEAKER_01
The sort of economic behavior of these gangs can have a big impact on the amount of violence in these countries.
4
SPEAKER_01
It was an economic decision by these guys that they thought that colluding would probably increase their profits more than competition would.
4
SPEAKER_01
So they decided to go for that, and instantly the country became a far, far safer place.
4
SPEAKER_01
That s a kind of interesting story for people who think that economics can be a way into this subject.
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It just shows that a single business decision by a couple of gang leaders can instantly transform the security situation in a very troubled country like that.
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So the story of El Salvador, I think, is one for people to look at.
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And since then, the pact there has broken down.
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And as I understand it, the country now has become a very violent place again, but it lasted for, I believe, a couple of years or thereabouts.
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there was a kind of peace in that country or a relative peace due to the changing dynamics between these two gangs.
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So I think it s worth some further study to see if that kind of peace can be replicated because El Salvador shows that it can be done, at least temporarily.
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Thanks for listening and supporting the Art of Charm.
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For a list of all the amazing sponsors and discount codes, visit theartofcharm.com slash advertisers.
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Now, back to the show.
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These cartels even keep wages low because there s no competition for talent.
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In other words, it s very hard to go from one to the other, and the way that they do this is kind of grossly ingenious.
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The tattoos, especially that gangs like MS18 have on their face,
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they show allegiance to one side.
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So, in Mexico, bangers can switch based on who pays more or has power, but in places like El Salvador, these face tats, not only do they prevent you getting any kind of real job whatsoever, pretty much forever, but they re basically cattle branding their members, right?
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It s like, if you ve got that, you can t switch back to Windows, you ve already got three Macs and an iPhone.
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Yeah, yeah, that s exactly right, and this was brought home to me when I went to meet the head of this
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cartel, the 18th Street Gang, in his jail cell in San Salvador.
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He was one of these guys who, they look extraordinary, you know, they re tattooed literally from head to toe.
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And I was sat there interviewing him and just wondering where this tradition had come from, of the kind of all-body tattoos.
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And I thought about the sort of labor market economics of it, and I think the way you describe it is
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exactly right.
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It does give these gangs, these cartels, a kind of ownership almost of their employees.
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Because imagine a regular employee.
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If you re good at your job, you may get an offer to work somewhere else.
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You know, you might try and get a job with a different company.
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You know, if I get sick of working at The Economist, where I am at the moment, if I feel they re not paying me enough, I could try and get a new job at, I don t know, Time or something like that.
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that would be somewhat harder if I had The Economist tattooed on my face.
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I find it a bit more difficult.
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Yeah, good luck getting rid of your... Following that logic is exactly what the gangs in El Salvador have done.
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If you ve got 18th Street gang tattooed the whole length of your body, going for a job interview with the Mara Salvatrucha is going to be a more bracing experience, to say the least.
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And so they retain a kind of ownership of their employees, and it means that they re able to keep wages very low.
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And it s one of the great paradoxes of the drugs business.
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You hear about the billions of dollars that are made in profits, and that s true.
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It is a fantastically lucrative business.
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But you meet the guys who are working as part of this industry in a country like El Salvador.
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And for the most part, they re not rich guys.
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They re making a few dollars a day.
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And part of the reason for that is that the cartels exert this very, very powerful control over their employees.
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Cartels further, though, they do the same thing as other mafias do, right?
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In New York, for example, sanitation, they ve got
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what we would traditionally refer to in economics as a cartel, where they agree not to lower the price for their bids to a certain level so they can extort, or at least in the past, they could extort the taxpayers to get higher pricing for waste disposal and things like that.
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No, that s right.
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The kind of price fixing is something that you see in all kinds of regular industries, and that s the point where organized crime and legitimate business have sometimes met in the past, because the mafias
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always played a role in many places of sort of enforcing these price-fixing agreements.
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So I read this one great study, actually.
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I think it s just about the earliest study that anybody s ever done of the mafia.
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It was done in Sicily sometime in the 19th century.
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And it was a study of the, I believe, the milling industry, as in the flour milling industry.
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And the millers there realized that if they fixed their prices, they could make more money than by competing.
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But the problem was that they couldn t rely on each other to uphold this agreement.
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You know, the worry was that one member would break the agreement and undercut the rest.
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And so they got a bunch of guys who were basically the mafia to enforce this agreement.
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You know, they all paid these guys on the understanding that if anybody broke the agreement, then the mafia would go and sort them out.
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And so that was one of the very first roles that the mafia played.
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They were there to
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make sure that these legitimate businesses didn t stray from the price fixing arrangement that they had made between them.
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And you see similar stuff going on in garbage collection industry in New York.
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Historically, that s an industry which has had a big, big involvement of the mafia.
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And again, the role that it has played there has been to protect certain contracts from competition.
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And it s interesting because when you get that kind of interaction between
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organized crime and regular business, it becomes a lot harder to stamp it out.
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If organized crime is something that all of society is against, then getting rid
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of it is much easier.
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When it s something that actually a lot of people in society have a stake in preserving, when you find that legitimate companies actually find the mafia useful in enforcing bargains between them, or when you find that local people are in favor of the mafia because the mafia provides them with public services in the way that Pablo Escobar did, you find that actually summoning the kind of popular pressure to get rid of these guys is much harder because they ve made roots in society, and they ve got people on their side.
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So those kinds of links are very, very important to cut out because the more you can isolate organized crime groups from the rest of society, the easier it is to stamp them out.
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On the other hand, the more those groups embed themselves and get their tentacles into
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bits of legitimate society, whether it s the business community or just ordinary people, the harder it s gonna be to get a kind of consensus that they have to go.
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So that should be a priority for all governments.
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Cartels and extortionists are franchising as well.
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Can you briefly explain the concept of what a franchise is in business and then explain how the cartels are also doing this?
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Oh sure, well I mean just briefly, probably the easiest way to describe a franchise is to picture an organization like McDonald s or say like Starbucks, you know, any kind of chain like that.
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where very often you have a central headquarters which runs the operation and then they will allow franchisees, local business people, to set up, say, a McDonald s restaurant.
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And the deal is that the local business person gets to use the McDonald s brand, they use the McDonald s recipes and all the rest of it.
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And in return, the central organization takes a cut of the revenues of that local business.
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And it s been very successful in the fast food industry, for example.
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It s a very, very quick way for
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companies to grow because it means that the company doesn t need to raise lots of money to set up new branches because the franchisee pays much of the startup costs.
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It means that consumers all over the country or all over the world know what they re getting.
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You know, if you order a Big Mac in London, it s the same one that you ll get in Los Angeles or the same one that you ll get in Beijing.
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And so for consumers, it often helps to, you know, increase the branding power of that particular organization.
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So it s been very successful, and surprise, surprise, the drugs business has gotten onto this as well.
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And when I was in Mexico, one of the big stories at the time that I was there was the spread of this gang called the Zetas.
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And they spread very, very quickly.
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Within the space of just a couple of years, it seemed that they d managed to set up a branch in every city.
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And so I looked at the situation and thought, well, how have they done this?
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And immediately it reminded me of organizations like McDonald s.
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And so I looked into it, and it seems that the Zetas are doing something very similar.
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What they do is instead of sending their own employees to a city to go and set up a new group there, they will send some agents there and talk to local criminals who run the show down there and say, look, OK, how about this?
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You can use our brand.
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We ll lend you the Zetas brand.
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And in return, we want a cut of your earnings and we can provide you with some training, with some weapons and with our logo and so on.
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And it s extraordinary.
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You find in some parts of Mexico, Zetas camps have been raided and they even find that these guys have got branded baseball caps and t-shirts and that kind of thing.
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It really is like a franchise.
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And it s helped them to grow very, very quickly.
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But the thing is, it s a problem, obviously, for Mexico, because these guys are growing very fast, but it s a problem also, the franchising business can create problems for the Zetas, just as it creates problems sometimes for McDonald s.
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And one of the things that you find with regular franchises is that sometimes franchisees will argue about the fact that there are supposedly too many franchises in a particular area.
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Right, encroachment is what they call it.
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Yeah, that s exactly right.
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And you find loads of court cases about this in the States and in Europe.
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Franchisees claiming that there s been encroachment, whether it s in McDonald s or in a hotel chain or whatever.
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And the problem that lies at the root of this is that the interests of the franchisees and the interests of the main firm aren t very well aligned.
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Obviously, from the point of view of the franchisee, it s great if they ve got the only McDonald s franchise in one big city.
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From the point of view of the firm, equally obviously, it s good to have as many as possible because they take a cut of total revenues.
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They don t particularly care if each individual franchisee is less profitable.
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And the same thing happens in the world of cartels.
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You find that
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individual franchisees, say, of the Zetas, often find that another Zeta franchise has opened up somewhere nearby.
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And rather than pursuing this problem through the courts, which obviously they can t do because this is an illegal business, they settle their differences using violence, which in the world of drugs is the only way to enforce contracts.
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And in many parts of Mexico, you find that some of the violence can be attributed to exactly that.
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It s effectively encroachment battles between different franchisees of the same cartel.
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which have found themselves situated a bit too close for comfort, and they re fighting over the limited amount of profits available in a particular area.
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In places like Acapulco, for example, there s some evidence that some of the violence is caused by effectively different franchisees of the Sinaloa Federation.
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And so it s something for these cartels to bear in mind as they do their franchising.
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It s a very, very quick way for them to expand, but they may find that their franchisees actually argue amongst themselves more than they might bargain for.
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There s a lot in this book.
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There s the idea that some cartels rely on territory, others rely on products and smuggling.
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It reminded me of internet business versus, let s say, brick and mortar.
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You end up with different cartel territories and things like that, and even online sales, which I wasn t sure was a real thing, but it seems like now,
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Well, Silk Road and websites like that no longer exist, but of course have been replaced by something else, I assume.
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Now you re looking at an entirely different way, an entirely different market and sort of pathway, trade route for drugs.
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Does this mean you can buy cocaine online?
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Obviously, I m asking for a friend.
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Yeah, you can.
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You can buy cocaine.
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You can buy more or less what you like online.
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It is amazing, if you go to these websites, like as you say, Silk Road itself no longer exists, but it s been replaced by a lot of other ones.
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You go on there and you can see these products for sale, different varieties of cocaine, of heroin, crystal meth, you name it, you can find it on the dark web.
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And alongside these products, you find reviews of the products by consumers.
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And a lot of these sites have been set up to look like eBay, you know, you find a kind of feedback from people who have ordered from the supplier and they can give a kind of thumbs up or thumbs down.
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It s extraordinary.
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It makes the business of buying drugs feel a lot more like the business of buying regular products.
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And I think for consumers, you know, it gives them certainly a lot more information about the product that they re buying.
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And it also gives them more information about prices.
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Because one of the key differences between drug markets and other regular markets is that in drug markets,
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is you don t have very much transparency about pricing.
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So let s say you re buying a regular product, a computer or something like that.
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If someone is trying to sell you it for more than the regular price, it s pretty easy to find out that someone else nearby is selling it for less or will sell you a much better computer for the same price.
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In the drugs world, it s very, very hard to do that.
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Consumers might know their regular guy who sells them cocaine for a certain price.
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they won t have any way of knowing if there s some other guy across the city who sells it much cheaper, or at least it s much harder for them to find out.
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And similarly, dealers don t have any very easy way of advertising their stuff.
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You know, they ve got a network of people to whom they sell their drugs, but if there s someone else who lives nearby who would be willing to pay more, they won t necessarily know that.
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They can t advertise, obviously.
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And yet online, they can do all of this stuff.
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They can advertise their prices pretty openly.
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Consumers can decide between products based on their price, between products based on their reviews and the quality and so on.
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And so it starts to resemble much more a regular market.
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It s not a kind of hidden market anymore.
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It s a regular, competitive, free market.
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And so what you would expect to find, and I think what we re probably seeing already, is that online the kind of drugs that you will find are probably of higher quality, that s to say, you know, greater purity, and probably of lower price, and crucially,
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they tend to offer better, what you might call customer service, and it s very, very surprising.
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You see these guys, drug dealers on the web, offering things like, if your shipment goes missing, we ll give you a 50% refund, or if you re a loyal customer, we ll give you a discount on your next offer, and they have kind of happy hour, and they have special promotions, and all of the things that you d associate with regular businesses.
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And so the online world of drugs, I think, really has the potential to change the industry
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quite a lot.
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It has the potential to, you know, drive up the purity of drugs, drive down prices, improve customer service and, you know, make it altogether a better experience for consumers.
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And in some ways that s good, but obviously the worry is that it could make drugs much more appealing and you could ultimately see an increase in drug consumption.
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Yeah, I m just, I m imagining, you know, fair trade cocaine and all inventory must go, flash sale, right, online, and there s lower barrier to entry if you re gonna sell online, there s lower risk, you don t have a need for an elite network of contacts as well, because they re coming through the website, and yeah, the level of trust is handled by feedback in the market, just like Yelp, you ve got blowsumer reports for the purity of your cocaine, unbelievable.
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Cartels are very diversified.
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Cartels are moving not just cocaine and things like marijuana, but avocados, of course there s human trafficking, oil, petroleum, even cheese.
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So have you done the math?
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I mean, what are the odds that we ve eaten or used something handled or managed by drug cartels that isn t drugs?
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That s a good question.
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I m afraid I don t have an exact answer for you, but I mean, it depends on where you live.
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So you mentioned the cheese business.
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This was something that happened in Central America where there was, at one point, the feared Cartel de los Quesos, which was the cheese cartel, and that existed to overcome a ban on imports of cheese from one Central American country to another.
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So if you lived in, I forget, I think maybe it was El Salvador, if you bought some good cheese there, there was a pretty good chance that it had been smuggled in from, I think it was Honduras.
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Anyway, with respect to regular products,
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I think it really depends what your definition is if you re talking about let s say, I don t know, avocados that have been directly smuggled by the Sinaloa cartel, the risk is probably fairly low, but I think where it s pretty likely that you may have indirectly contributed to cartels finances
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is through the fact that in areas like saint mitchell can in mexico where a lot of avocados that you eat in the states may come from a lot of the businesses that pay extortion money to organize crime and that increases their costs and as their costs go up they have to raise their prices and as they raise their prices to retailers in the states have to raise their prices to consumers so far is it the case that.
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Many, many farmers in Michoacán will pay extortion money to the Sinaloa cartel.
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And insofar as it s the case that those farmers ultimately will pass on some of those extra costs to consumers in the United States, it s highly likely that some of the money you pay for your avocado in, say, California
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will find its way back indirectly into the hands of the Sinaloa cartel.
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I m afraid it s something you can never get away from entirely.
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I mean, of course, in the drugs business, you can be pretty sure that every cent of the money that you pay for your cocaine is going, by definition, into the criminal economy, and a lot of that is making its way back to Mexico to fund the kind of horrible violence that we were talking about earlier.
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But even in something like the avocado business, you can t rule out the idea that, you know, a few cents in the dollar that you pay for your avocado may end up in the hands of someone rather unsavory.
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Geez, you might as well put cocaine in your guacamole at this rate.
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I wouldn t go that far, but yeah.
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Probably not.
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It s pretty prevalent in Mexico.
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Yeah, you can say that for sure.
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Yeah, oh wow.
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Well, the moral, don t do drugs, but if you do, just make sure that it s fair trade.
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This has been absolutely fascinating.
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Thank you so much, Tom.
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Narconomics will be linked, of course, in the show notes as well.
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It s a great read, and it goes by quick, and there s just so many interesting parallels here between the cartels and quote-unquote regular business here in the good old USA and the rest of the world.
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So thank you so much for your time.
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This has been super interesting.
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Jason, what d you think?
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That was pretty interesting, right?
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Not our usual fare, but totally worth it.
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Yeah, definitely not our usual fare, but fascinating.
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I was on the edge of my chair trying to buy me some cocaine while the whole thing was going on.
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That s right, yeah, exactly.
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That s what I should ve had for breakfast, all this jet lag going straight to my brain.
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Yeah, forget coffee, man.
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Yeah, exactly.
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Who needs coffee when you can have cocaine guacamole?
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The fact that the cartels are doing the same thing as entrepreneurs and regular businesses, and even doing the branding and PR and social responsibility, that to me was just fascinating.
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I mean, granted, look, we re not trying to give the guys who are running the shop here too much credit.
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These are things that they probably conceived of on their own, and there s a lot that they re not doing that regular businesses are.
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So I don t want to romanticize this too much, but I did think the idea that Tom took this
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economist perspective on everything, about franchising, regulating labor, branching out online, diversifying into the different markets.
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I mean, I m curious, I wonder if anybody s ever done the math on this, or if it s even really reliably possible.
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It seems like there s a major chance, especially if you live in a warm area where we re consuming a lot of Mexican produce and things like that, what are the odds that what we re consuming has had any contact whatsoever, even tertiary,
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with the cartel, like he said, the extortion payment for the avocado farmer.
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I m super curious about that.
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And if you enjoyed this one, by the way, don t forget to thank Tom on Twitter.
6
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We ll have that linked in the show notes, as well as other resources mentioned on the show, including his book, Narconomics.
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And I don t know, Jason, should we link to the Twitter account of El Chapo s kid?
6
SPEAKER_02
Oh, I think we have to at this point.
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I think we have to, yeah.
6
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It s not that interesting, but we talked about it, so it s up there.
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And by the way, you can tap our album art in most mobile podcast players to see the cheat sheet for this episode right on your phone.
6
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The show notes will be right on your phone.
6
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By the way, I was talking to a couple foreign fans of the Art of Charm, and they said, what are you saying?
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When you say cheat sheet, most people don t understand that.
6
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So I think we re gonna just call it the show notes instead of the cheat sheet.
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I m also on Twitter, by the way.
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A lot of stuff never makes it to the show.
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There s a lot of articles, insights, other ways to engage with me and producer Jason.
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I m at theartofcharm on Twitter.
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Our live programs that we run every single week here in LA, those bootcamp, that s what we call it, bootcamp.theartofcharm.com, we sell out a few months in advance, so if you re thinking about it a little bit, get in touch ASAP.
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SPEAKER_01
That s where we teach a lot of the concepts of AOC, body language, nonverbal communication, persuasion, et cetera, from us directly.
6
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We ve also got the AOC Challenge, if you wanna just dip your toes in the water, that s at theartofcharm.com slash challenge, or in the States, you can text charmed, C-H-A-R-M-E-D, to 33444.
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SPEAKER_01
The challenge is about improving your networking skills, your connection skills, inspiring those around you to develop a personal and professional relationship with you.
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And we ll also email you our Fundamentals Toolbox that I mentioned earlier on the show, and I ve got videos with drills and exercises to help you move forward.
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I do those every week.
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So this will make you a better networker, it ll make you a better connector, as well as a better thinker.
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That s theartofcharm.com slash challenge, or text charmed in the US to 33444.
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For the full show notes for this and all previous episodes, head over to theartofcharm.com slash podcast.
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This episode of The Art of Charm was produced by Jason DeFilippo.
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Jason Sanderson is our audio engineer and editor.
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Show notes on the website are by Robert Fogerty.
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I m your host, Jordan Harbinger.
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Go ahead, tell your friends, because the greatest compliment you can give us is a referral to someone else, either in person or shared on the web.
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So stay charming and leave everything and everyone better than you found them.
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Thanks for listening to the Art of Charm.
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Get more confidence, relationship skills, life hacks, and more at theartofcharmpodcast.com.