Exposing Ponzi

So my brother was recently a victim of a Ponzi Scheme… I knew it was it was happening but people do need to learn these lessons themselves.. so there really wasn’t any point in explaining it to him.. because until you experience one it’s hard to believe whatever magical business your getting wrapped up in is an Ponzi scheme.  Well even tho it’s best to experience the Ponzi for yourself.. I’m still going to try and explain in a nutshale what it is and where it came from.

In 1920, Charles Ponzi, ran a scheme in which returns are paid to earlier investors entirely out of the money paid into the scheme from newer investors.  This type of scheme shows how the lure of money can and will fool even the most agile mind!

JOIN NOW!  This amazing system really works.  I was on welfare and today, three weeks later, I’m a multimillionaire. 

How many times have you been invited to join in a remarkable and foolproof new scheme that promises huge returns for a mere $1 “investment” of your own money?  New versions of the scheme appear every few years but the basic principle is the same.  You receive a letter from someone claiming that they can make you rich beyond your wildest dreams.  You send some money to the name at the top of a list and place your name at the bottom.  Then you send out seve send allral copies of the letter and as new members join in below you, your name rises up the list.  Within a few weeks you receive your windfall.

The flaw?  Well at first glace the mathematics seem almost plausible, but CvC readers arn’t going to be fooled. Suppose you receive a list containing seven names. You are instructed to send a dollar to the person at the top of the list, then remove the top name and place your own name at the bottom of the list. You send the letter to 10 other people, and they all send their letters to 10 others and so on and so on until at the eighth level, you should have 10 million people receiving a letter with your name at the top of the list. Even if just 10 percent of them send you a dollar, you will be a millionair.

But here’s why Ponzi schemes don’t work. There arn’t enough people in the world to ensure that ore than the first 11 names on the list get rich. Unless you are one of the first 11 people in the world to receive the letter you will make no money. Those eleven are the original crook and his or her 10 good friends.

Suppose for a moment you were fortunate enough to have joined at level three. You are one of the first 100 people in the world to receive the letter. Lucky you! But for those hundred to make any money it would require the particicipation of further 1,000,000,000 people (or one-sixth of the world’s population).

In reality, you can guarantee that by the time the letter reaches you, it has already been four times around the world and you will be joining at the eight or ninth level. You will be one of 10 mllion other people hoping to get rich. For all of these eighth-level entrants to receive a penny, it would require 100,000,000,000,000 participants or more thatn 16,000 times the population of the world.

Most people that are duped by these schemes only look forward to the potential gains but neglect to look backwards at the number of people who have already participated . These schemes create zero wealth. All they do is move wealth from a large group of peple to a handful of crooks who started the whole con.