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Flights of Fancy

That as unlikely an object as a ugly, large flightless Australian bird could become the centre for a financial scam shows the depth of gullibility in India

If you google “emu farming”, you are likely to get a handful of newspaper articles about the emu farming scam. Along with that that, the search page will also have a large number of advertisements placed by companies promoting emu farming. After taking a moment to marvel at the magic of contextual advertising on the web, you should glance over the articles as well as the websites that the advertisements link to. You will find that there is perfect concordance in the topics that the two bring up.

The websitesextol the nutritional virtues and the large market for emu meat while the articles will say that no such market exists. The websites talk about how emu oil is revolutionising cosmetics, the articles will tell you that emu oil is not used in any cosmetics. The websites will tell you how emu eggs are delicious and healthy while the news articles will tell you that no one can bring themselves to eat giant dark green eggs. The websites tell you how investing in emu farming will yield fabulous returns while the articles tell the familiar tales of vanishing promoters and ruined investors. There’s one point on which the news articles and the website point in different directions. The media sees this as a Tamil Nadu-based phenomena while the advertising is actually fromemu farming outfits from all over the country, especially Punjab, Haryana, Rajasthan and Gujarat. There’s even an emu-promoting NGO in Gujarat that is advertising online. There are no advertisements from Tamil Nadu-based emu outfits or those from other southern states. Clearly, emu fever has broken in the south but is now spreading unchecked across the country.

We’ve seen this story play out many a time with teak plantations in the 90s being the first one that gained widespread notoriety and Jatropha plants being one of the recent ones. However, the farming and rearing kind of stories are fundamentally similar to others like the various gold coin schemes as well as the survey companies that had come up in recent years. These are essentially financial Ponzi schemes that take advantage of a poorly informed investing public and a financial regulatory system that has does not appear to be equipped for (or even tasked with) detecting them.

Apart from outright Ponzi schemes, there are plenty of financial investment seeking outfits that are disguised as other businesses, including some established ones. For examples, across the country, there are real estate developers who are offering people an opportunity to invest in property with guaranteed returns and a promise to refund investments if a certain amount of returns do not materialise. Boiled down to the basics, this is a deposit scheme in the garb of a real estate purchase. There’s a clear case for such schemes to be treated as financial investment businesses and be examined by the Reserve Bank or SEBI. Whether it’s emus or teak, there’s a need to distinguish between people who grow their own plants or rear their own birds (which are businesses, regardless of their viability) and those who are just investing in others’ activities, which are clearly financial investments. Financial investments in such ventures cannot be treated differently than any other kind of financial investments.

The emu story, coming as it does on the heels of so many similar ones, also points to a deeper problem. Why do large number of people fall for such things? Unfortunately, the answer is not very encouraging. As far as investing goes, there’s a deep belief in the hidden secrets theory. Whether it’s the stock markets or more exotic stuff like antipodean birds, way too many people believe that there exist secrets formulae whose knowledge can bring great wealth. This changes the problem from one of choosing a good investment to that of finding someone willing to reveal the secret to you. And that’s fertile ground for scams. Meanwhile, I’m looking for a restaurant that serves a good emu biryani.