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Fraudsters, the charlatans of the 21st century

A word that is used very often nowadays on the internet is fraudsters. A fraudsters is a person or company that sells you a product you don’t need at a gold price. The Dictionary of the Spanish language  use the word vendehúmos  with the meaning of ‘person who holds or simulates valimiento or privanza with a powerful to sell his favor to the suitors‘.

However, nowadays it is used to refer to those who make unsubstantiated, utopian, ridiculous, worthless, illusory proposals…. That is, ‘trying to convince with meaningless words or arguments’, according to the Academy’s definition.

These vendehúmos, fraudsters, charlatans of the XXI century, shamans, gurus, take advantage of others and live a life that is an optical illusion. In many cases they create a pyramid where they are at the top and feed on the steps below. Or they claim to have created an algorithm because they are very intelligent, more so than you, although they never prove that such an algorithm actually exists.

The pyramid scheme

A pyramid scheme is an incomplete and unsustainable business model,in which some high-level members recruit newer members. Those members pay the chain’s upfront costs to those who enrolled them. As newer members in turn recruit their own subordinates, a portion of the subsequent fees they receive also increases in the chain.

Often called “pyramid scams,” these operations are illegal in some countries. In Spain it is considered a deception according to article 24 of law 3/1991 of January 10,which says:

Article24. Pyramid selling practices. It is considered unfair for misleading, in any circumstance, to create, direct or promote a pyramid sales plan in which the consumer or user makes a consideration in exchange for the opportunity to receive compensation derived primarily from the entry of other consumers or users into the plan, and not from the sale or supply of goods or services.

Supposedly you’re going to be rich unintentionally

Who wants to be rich today? Not tomorrow, today. I understand that many of you address “me!”. in addition… who wants to work 2 hours a day and then spend the rest of the time playing, dancing, traveling, meeting people, enjoying life. I know, we all want this. And if I ask who wants to work and receive a salary in exchange?. Many of you will say “I already do that now, but I want to make money”.

Pyramid schemes often function as a club, in which people pay their “registration fee” or “gift” or “donation” to people who are “higher up” in the pyramid, with the expectation that new recruits who join below will pay them ” and add a new rung to the pyramid.

This definition leads one to think that it can work however it does not work. It only works for a ridiculous % who live at the expense of those at the base of the pyramid. These are frauds, scams, trust tricks and illegals in most countries for the simple reason that people are given the fraudulent impression that they will definitely make money when, in fact, they are very likely to lose it.

Taking as a starting point the pyramid of Fig. 1 and if we use a scheme in which 1 person adds to 6… after 13 steps we would have already surpassed the 7,800 million people living on the planet. That is, it is not possible for the pyramid to grow downwards because it reaches a time that is saturated and no new links are created.

Figure 1. Source: https://commons.wikimedia.org/w/index.php?curid=3780400

Living at the expense of your acquaintances

It seems like an easy way to get rich, until you realize that the only way someone makes money in a pyramid scheme is by taking it directly from other participants, mainly friends, relatives and co-workers. In addition, it takes very little time for a province or country or social network to be flooded and saturated with members of the scheme, the vast majority of whom will never make money, because they are at the base of the pyramid and if they want to create more levels there are no numbers to sustain their rung (see Fig 1).

I remember a neighbor got a letter in the mail quite a few years ago that followed this pyramid scheme. The neighbor was convinced, and even went so far as to do what the letter said. The instructions were that he had to send money to the person who had written to him and in turn he had to write a letter to 100 different people. In his letter he put his address and that the person receiving that letter had to send him x money. I have to say one thing, my neighbor didn’t get rich and lost money on stamps  from sending 100 letters to strangers.

Reward is in living from air at the expense of others

The fraudsters are usually at the top of the pyramid, just like The Lion King. The message of these so-called influencers would not go beyond the bar of a bar in your town. However, they adorn their message with neuromarketing techniques they have learned by reading. They have not invented anything, they have studied how to indoctrinate other people to listen to them.

If you’re such a smart person I don’t understand why you need to make money at the expense of others. Wouldn’t it be better to work in a company and have that company reward everything you know with a salary a month?. Private enterprise is depriving itself of someone hyper-prepared like you.

Many of these fraudsters are shown as successful people. They’ve made movies, they’ve come out on TV (like that’s an achievement), they’ve created ads networks to get more people involve.

However, the incongruity, at least for me, is that they themselves make videos to show you that they are successful people. If you were a successful person you wouldn’t make videos on Youtube that you promote, you pay for others to see you.

The Ponzi scheme

Charles Ponzi was a Boston investment fraudsters broker who in the early 1920s was momentarily famous as a foreign postal coupon supplier that promised fabulous rates of return for its investors.

Ponzi issued bonds that offered 50% interest in 45 days, or a 100% profit if held for 90 days. The supposed source of this windfall was the spread obtained in the mail coupon trade. Actual profit from postal coupons never amounted to more than a fraction of a cent each.

The reason this is a scheme, not an investment strategy, is that the progression on which it depends is mathematically unsustainable. You must continually attract more and more new people to the system to pay for promises to former members. So if they promise to double your money, the only way they can do that is to get two new people to give the same amount you invested. But now you have two new people, each of whom expects the same reward. And to pay them, you need to hire four new people. And to pay for those four, you’ll need eight more, etc.

After a few rounds of this kind of increase, the number of new entrants in the next round would be greater than the number of people on earth. That’s why all pyramid schemes inevitably collapse.

Birth of pyramid scams

Although Charles Ponzi gave his name to such scams, he did not invent them. In Boston, in the 1870s, another fraudsters Sarah Howe  opened a women’s bank that promised 8% per month on deposits. The money poured in. Like many of these later plans, Howe was denounced by newspaper reporters.

Fraudster Howe opened Ladies Deposit Company  before April 1879 as a savings bank that accepted deposits only from unmarried women. She told depositors that the bank worked with a Quaker charity that wanted to help underprivileged women. He promised a very high interest rate on deposits, initially described as two percent per week, which was then adjusted to eight percent per month. In fact, there was no such charity and Howe relied on the new deposits to pay the interest of the older ones.

Howe did not advertise the bank, but was able to attract $500,000 in deposits from about 1200 women in cities as far away as Chicago and Washington by relying on references from its depositors.

In September 1880, the Boston Daily Advertiser began publishing articles attacking the Ladies Deposit as a scam, causing its depositors to flee and collapse. By October, the plan had collapsed and Howe was charged with multiple fraud charges. She was convicted and served three years in prison.

Summary

The reward is in the effort. If you believe that there are miracle recipes and that you are unique and that you can make money without doing anything I have to tell you that you will not get it. We all have limitations and the way to improve is to work hard. Study, break your head in improving and not make cases to pyramid scams.

People who allegedly tell you that you can get everything you want are nothing but Eskimos in the desert. You have to carve out the opportunities yourself, work to get it and stop giving empty charlatans. These fraudsters are not your solution of your life.

There have already been stories of pyramid schemes throughout history and it turns out that new digital scams are still being born in today’s world. Ignore and if you see an advertising video click on the button to STOP SEEING THIS AD and then on  IRRELEVANT. Ignore these fraudsters.

References

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