On January 29th, 2005, we were talking about the James Randi $1 Million Paranormal Challenge in the chat room. If you don’t know what the Challenge is, the short version is that this ex-magician, James Randi, is willing to give a million dollars to anyone who can prove something paranormal. It’s common for people to ask us why we don’t take the Challenge with all the stuff we talk about on PsiPog. Clearly we qualify for the paranormal, and it would seem like easy money. While talking in the chat room, annie made the observation that the prize was in the form of bonds, and not cash. She tried to explain to me how bonds can be “worth” a million dollars legally, but in reality could be completely worthless.
So I decided to do some research on what might be going on. I had thought about taking the Challenge, and I know some of my friends have thought about it too… million bucks seems pretty sweet. But I’ve heard of stories about how Randi is dishonest, and it’s all a scam. Either way, I figured researching would be the best way to figure out what the deal was.
I started by e-mailing Randi, and everything just went downhill from there. For me to type out everything that happened, it would take me forever, and it would be really boring to read. So this is what I’m going to do; I’m going to summarize what happened. Now obviously I am biased because I played a key role in this situation. I will try to summarize without being biased. But, you don’t have to trust me… I will post the logs of what actually happened at the end, and if you want to take the time to read through it all and confirm my summary, then go right ahead. Also, because I am aware that I am biased, I am open for any discussion and questions on what happened. The best way to get in contact with me would be the chat room, the Q&A, or as a last resort, you can e-mail me at peebrain [at] psipog [dot] net.
What is a bond, and why is it different than cash?
First, you have to understand how bonds work. I was really confused at first – I mean, if Randi is offering a million dollars, how can it be “worthless”? It seems very clear cut.
Bonds are certificates of debt. That means that a bond is basically an IOU. Corporations or governments need money to fund projects, so they go to rich people and say, “hey, give us some money, and we’ll pay you some interest, and then after a while, we’ll give you all your money back”.
Bonds have four key elements: who issued them, what the interest rate is, when they’ll give the money back, and how much money was borrowed to begin with. The best way to show how it works is just to give you an example.
Let’s say Bob’s Bakery needs some money to buy baking equipment. Now, once they have the equipment, they can bake and make money – but they don’t have any startup money to get the gears in motion. So they go to a rich guy and say, “Hey, if you give us $10,000, we’ll pay you $100 every month for 24 months, then we’ll give you your $10,000 back to you”. This is appealing to Bob’s Bakery because they can get their company started, and once it gets going, they’ll start making money. From their profits, they’ll take $100 each month and give it to the rich guy. Then after 24 months, they have a successful business, and pay the entire debt back to the rich guy. Bob’s Baker keeps growing and making more money, and Bob is happy. The rich guy is also happy, because he just gives $10,000 to Bob, and doesn’t have to do anything. The rich guy doesn’t have to bake, or buy equipment, or hire employees, or any of that garbage. He just invests a small amount of his money, and in return gets $100 more a month, and all his money back after 24 months.
So, that’s why and how bonds exist. Rich people want more money, and poor entrepreneurs want a successful business. (Of course, I’m simplifying this entire situation just to get the point across; in reality it’s a little more complicated).
How can bonds be legally worth money, but be worthless?
Where is the problem? Well, what if Bob’s Baker doesn’t succeed, and goes bankrupt? What happens to the $10,000? Basically: it’s lost. Rich guy doesn’t get his $100 a month, and rich guy loses out on $10,000.
How does this all translate to the James Randi Million Dollar Challenge?
The prize isn’t cash. The prize is bonds that are WORTH a million dollars. So, there are a lot of Bob’s Baker people running around with the money, and they all gave Randi an IOU. And all these IOU’s total to a million dollars.
Since the prize money is in the form of bonds, then it is possible that the bonds are worthless. For example, maybe a lot of the bonds are from corporations that are on the verge of going bankrupt? Or maybe the corporations don’t have to pay off the bonds for another 40 years? In our example, Bob had to pay everything back in 24 months… this is called the “maturity” of the bond. Some bonds don’t mature for a few years, others don’t mature for a few decades. If Randi awards the prize of a bond that doesn’t mature for 40 years, then legally I do have a million dollars… but I can’t USE the million dollars until the bonds mature! As you can see, there are a lot of different scenarios where the bonds could be LEGALLY worth a million dollars, but in reality they could be worthless.
Does the Challenge have worthless bonds?
The next logical step is to find out what the bonds are really worth. To do that, I e-mailed Randi at the address he provided on his website. I politely pointed out where it said the prize was in bonds in the Challenge rules, and then I asked what corporations issued the bonds, what the interest rates were, and when the maturity dates are. These are the main factors at determining if the bonds are worthless or not.
Randi replied with, “Apply, or go away.”
I explained to him that I wanted clarification on what he was offering. That this had nothing to do with my claim, but they were questions aimed at getting more information about the Challenge.
Randi replied with, “Immediately convertible into money. That’s all I’m going to get involved in. Apply, or disappear.”
Obviously that doesn’t answer my question at all. Immediately convertible into how much money? Convertible through who?
I e-mailed Randi again, asking for clarification. I didn’t mean to be annoying, but they weren’t answering the question. Why would I apply if the bonds were worthless? The Challenge rules state that I am responsible for all costs incurred in the pursuit of the prize money… so it’s quite possible that I could jump through all the hoops, spend my own money, and only have a pile of worthless bonds to show for it.
Randi passed me off to Kramer. Kramer’s job is to handle all paranormal claims. Kramer introduced himself in an e-mail, “Randi has directed me to correspond with you directly regarding your inquiries into the JREF Challenge. […] I handle all Challenge-related activities, so write to me here if you have more questions.”
Ok, fair enough. So, I politely explained my situation to Kramer, and asked the same questions again. Kramer replied with, “So far, you’re just full of shit. That’s OUR perspective. Apply or go away. We don’t have to prove anything to you. If you really have a claim, you’ll apply.”
Enter JREF Forums.
I’m not dumb… before e-mailing them, I had suspicion that things would get ugly. That’s why I painfully tried to stay as polite, logical, and consistent from the start. Before emailing them, I noticed that Kramer would post e-mail conversations in the forums on their website, and comment about how the person e-mailing them is a moron. Now that I was the moron e-mailing them, I searched the forums for Kramer’s new thread on the idiot asking about the bonds.
And I found it.
I expected to find a bunch of pseudo-skeptics making fun of me. And I did. What I didn’t expect to find is that Kramer EDITED the e-mails before posting. All of the sudden, his “full of shit” comment was translated to “full of baloney.” And Randi’s “Apply, or disappear” was translated to “Apply, or don’t apply.” Similar minor translations were made to convert rude text, into stern but polite text.
Now, is that a big deal? Not really. Obviously it was a big deal to Kramer though, or he wouldn’t have taken the time to edit it.
Luckily, my message was still getting across on the public log in the forum. Perhaps he edited the logs to make Randi and himself look better, but my questions were still there. To my surprise, some of the forum members sided with me. They thought my questions were legitimate.
Misinformation and misdirection.
Since the other members agreed with my questions, Kramer decided to post an answer to them. This answer never made it back to my e-mail, and the only reason I found it was because I knew Kramer would try to make me look like an idiot on the forum (like he did with everyone else who e-mailed him privately). Kramer’s answer was that the prize was CASH, and not bonds.
Whoa, ok, that’s a surprise. The rules state: “…JREF will pay to the claimant the remainder of the reward, for a total of US$1,000,000. One million dollars in negotiable bonds is held by an investment firm in New York…” This can be read either way. Personally, I read it to say the prize is bonds. Kramer decided to interpret it that the prize is CASH (based on the “US$1,000,000” quote).
So I’m the idiot, right? Luckily, there were others who saw it my way. Maybe they didn’t believe in the paranormal, but they were logical enough to see that I brought up a legitimate issue. If Kramer says the prize is cash, then the rules page should be changed.
During this time period, I began posting on the forums to clarify my position (and to point out that Kramer had edited the e-mails). The arguments were pretty interesting, but the meat of the matter still was: the rules aren’t clear that the prize is cash, and if the prize is bonds, then what are the details about the bonds.
The next thing that happened absolutely blew me away. Kramer posted on the forums that he received an e-mail from me. In this e-mail, I complimented Kramer’s hard work, and told him the issue was resolved. The only problem is: I never wrote or sent that e-mail.
A false e-mail?
I was in shock when I read what Kramer had posted. This wasn’t minor edits to sway people one way or the other – this was blatant fabrication. To be fair, Kramer could have been a victim of someone posing as me. But let’s look at the evidence.
I e-mailed both Randi and Kramer from a private account. I had not used that account for anything else. Nobody on the forums, nobody on PsiPog, and not even my close friends know what the account is. Only myself, Randi, and Kramer. For a third party to fake the e-mail, they would have to either e-mail Kramer from another account (which should make Kramer suspicious), or they would have had to fake an e-mail from my private account (which only myself, Randi, and Kramer know about).
On top of that, Kramer had already shown that he’s willing to edit e-mails. I attempted to ask for a way to look into this fake e-mail situation more, but it quickly got brushed away under all the other arguments. Kramer certainly didn’t care.
A noble idea.
All the fraud aside, most members agreed that something should be done because things weren’t clear from the start. A poster offered to write up an FAQ about the Challenge that could be posted on the website. The idea is that Kramer could direct people to the FAQ when they ask common questions, and this could save Kramer time.
In the drafting of the FAQ, the poster put a question about the form of the money. We had concluded on the forum that it was in cash, and not bonds. Remember? In the FAQ, the poster added the question:
“If someone wins, how will they be paid?”
Although the prize money is held in bonds as a way to publicly show that the money really does exist, the bonds will be converted to US dollars before being paid. The first $10,000 of the prize money will be paid by check, as stated in the Challenge rules. The usual method for paying an amount as large as the remaining $990,000 is via electronic transfer, and it is reasonable to assume that that is how this prize money will be paid as well.”
This is what Kramer had been telling us all along, and this was identified early as the source of “my confusion”. Kramer loved the FAQ, and decided to officially post it on the website so he could refer people to it. Of course, he made a few edits to the draft. The final version of the FAQ is below:
“If I pass the formal test and win the Challenge, how will I be paid?”
The first $10,000 of the prize money will be paid by check, as stated in the Challenge rules, immediately upon the successful demonstration of their claim. The prize money is held in the form of bonds as a way to publicly show that the money really does exist. These immediately convertible bonds will be awarded to the Challenge winner within 10 days of passing the formal test. The manner of transfer of these bonds will be at the discretion of the JREF and the Challenge winner, in accordance with acceptable legal standards.”
It turns out the prize IS THE BONDS.
So my original assumption was right after all. The prize is the bonds. And my questions have still gone unanswered. What is there to say? Well, the most obvious thing I’ve learned from this is that Kramer certainly isn’t trustworthy. He edited the e-mails, and told everyone the prize was in cash. And no one knows where the false e-mail came from (and Kramer hasn’t provided anyone with information that could help us figure it out). At the time of writing this, he hasn’t addressed the original issues which sparked this entire fiasco (who issued the bonds, what are the interest rates, and when are the maturity dates?). And he hasn’t addressed the issue of misleading EVERYONE on the forums, by stating that the prize is cash.
While the members of the forums show different levels of skepticism, Kramer certainly does not show anything relating to real skepticism. His mentality is that of a fundamentalist – he is right, everyone else is wrong, and it’s ok to “bend” the truth to convince others. This is the exact opposite of healthy skepticism. If you are seriously considering taking the James Randi $1 Million Dollar Paranormal Challenge, it would be very naive to think it’s as clear cut and simple as they portray it. When you put your signature on that application, you are signing a contract with them. If they have a hard time playing fair when it’s just a few e-mails, imagine how they’ll act when a million dollars is on the line (assuming that the bonds are actually worth anything to begin with, of course).