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Pyramid schemes, MLMs, and even Ponzi schemes are very popular in developing countries. Strangely, participants seem to pile in despite knowing up front that th

Pyramid schemes, MLMs, and even Ponzi schemes are very popular in developing countries. Strangely, participants seem to pile in despite knowing up front that they’re joining a scam. I think people have recognized that MLMs, pyramid schemes, and Ponzi schemes are lucrative for early adopters and those at the top. Instead of avoiding the scheme altogether, they’re racing to cash in early before it collapses. It’s a gamble that they’ll be on the right side of the trade before it runs out of steam. The power of “but what if it works...” Some of the more blatant Ponzi schemes operate in the open for years in developing countries. There can even be public outrage when governments try to intervene because so much of the population is invested in these schemes in one way or another. A good example is MMM global: https://en.wikipedia.org/wiki/MMM_Global https://en.wikipedia.org/wiki/MMM_Global

neutronicus 6y ago
I don't know why that's strange, it's basically the same as GME was over here
- nwah1 6y ago
  Is. GME is still going.
- penagwin 6y ago
  I don't think it's fair to call the GME short squeeze a scam, it was just a community taking advantage of the mathematics at the time. There wasn't any misleading information or false promises, just people FOMO'ing in with the bubble. EDIT: Also GME is at 240, it's not even a short squeeze anymore it's just bizarre
  - throwaway8581 6y ago
    The small kernel of truth at the heart of it makes that much better of a scam. A pump and dump works better if in the pump stage, you have a good sounding reason.
  - PragmaticPulp 6y ago
    Did you see the posts on WSB and /r/stocks about the claimed AI model that predicted the price would go to $100K? The original short squeeze narrative wasn’t really honest or accurate in the way it was presented. It was the narrative and the hype that drove the price up, combined with some gamma squeeze. The narrative about the “Mother Of All Squeezes” as they keep referring to it is not accurate.
    - penagwin 6y ago
      I guess but then again there's almost 10 million people now on WSB - and people can say anything. I'm not sure how this is different from say bitcoin, where I've heard estimates of "100k by the end of the year" since 2016
      - PragmaticPulp 6y ago
        You’re exactly right. Bitcoin investors make their money by convincing people to buy Bitcoin and never sell it (HODL). Before anyone claims it’s the same for stocks: It’s not. Stocks are an actual claim on underlying businesses, their cash flows, IP, and their assets. Bitcoin’s attraction is that it has no underlying fundamentals to compare against, so proponents can say it’s going to whatever price they want and no one can point out how silly that is. As long as people continue buying, the price goes up. Why are people buying? Because the price goes up.
        scsilver 6y ago
        Yeah but these bitcoin HOLDrs are also convincing JP Morgan, BNY Melon. Surely these professional financiers aren't unsophisticated ponzi scheme victims? https://www.wsj.com/articles/bitcoin-to-come-to-america-s-oldest-bank-bny-mellon-11613044810b https://www.wsj.com/articles/bitcoin-to-come-to-america-s-ol... https://www.bloomberg.com/news/articles/2021-02-25/investors-could-add-up-to-1-of-bitcoin-to-mix-jpmorgan-says https://www.bloomberg.com/news/articles/2021-02-25/investors...
        panarky 6y ago
        > Stocks are an actual claim on underlying businesses, their cash flows, IP, and their assets. This is not true. If you buy a share of GOOG, you have zero claim on any of Alphabet's cash flows or assets. The company doesn't pay a dividend and doesn't expect to pay a dividend in the future. So there's no income potential. There is no scenario under which you can convert your share into any of the company's intellectual property or physical assets. Your share doesn't even give you the right to vote on anything. There is only one thing you can do with your share, and that's sell it to someone else. So the only conceivable purpose in buying GOOG stock is the hope you can sell it to someone else for more than you paid.
- Nextgrid 6y ago
  The GME craze doesn't rely (or at least doesn't appear to) on people joining and perpetuating the scheme. I'm not aware of any long-term meme-stock trading "strategies" being peddled around - it's pretty clear that it's mostly gambling and people are simply making one-off bets. On the other hand, the various "trading" schemes (whether Forex or crypto or binary options) typically rely on the promise of long-term, sustained profits, buying various courses or trading tools and referring other people to it.
  - throwaway8581 6y ago
    The GME craze absolutely relies on people joining and perpetuating the scheme. The price only goes up because Reddit-tier idiots keep buying. Instead of old school pump tactics, the pumpers used memes and hivemind manipulation, but it's still just a standard pump-and-dump. The "short squeeze" was the kernel of truth that it made it all the easier to sell idiots on the scam.
  - PragmaticPulp 6y ago
    > The GME craze doesn't rely (or at least doesn't appear to) on people joining and perpetuating the scheme. Yes it does. The entire WSB narrative encourages everyone to buy more GME and never sell it. They’re not doing this as a favor to readers. They’re doing it because encouraging others to buy and hold is what drives the price up. Their “mother of all short squeezes” theory doesn’t match reality at all.
    - vmception 6y ago
      I love how the options spread traders are flying completely under the radar. I have never seen a more lucrative spread market. Every time these diamond handers have this thing range bound for a few days, spread traders are making like how many percent? A hundreds? Sure these occasional blow offs can wreck the position, but its limited risk.
  - vmception 6y ago
    It does. GME doesn’t issue dividends and they will need to sell stock to change course, this requires even more new investors than now to perpetuate. There is an arbitrary distinction between pyramid schemes and respected financial realities. It isn’t really useful to draw the line, just play the game or don’t.
- adventured 6y ago
  > it's basically the same as GME was over here Still is. GME was $2.50-$20 across years. Now it's magically $239 (up 22% as I write this); up ~500% in ten trading sessions or so. It's a twisted joke on a whole lot of amateur investors that think they'll be the ones to successfully navigate the pump & dump and get out before it crumbles. The party will no doubt continue until the music stops (treasury yields rise too high).
- throwaway8581 6y ago
  People replying to you claiming that the GME hype wasn't a scam is just great proof that the suckers will always be with us.
deleted 6y ago
[deleted]
liaukovv 6y ago
Politicians have an advantage when joining it
dgellow 6y ago
People often believe they will be able to leave before the pyramid crashes. Which of course doesn’t make sense, statistically it’s very clear the vast majority will lose everything when the insiders start to crash out or are arrested, with no way to get their money back when everybody is rushing to leave the scheme. The common say is that most car driver believes they are above average. ¯\_(ツ)_/¯
- wayneftw 6y ago
  > ...statistically it’s very clear the vast majority will lose everything... The same is true for state lotteries and other forms of gambling, but many people continue to participate. I think of it like buying useless items too. "The state of anticipating and desiring a product may be inherently more pleasurable than product ownership itself." [0] This is very similar to gambling where you are essentially paying for the opportunity to feel hope. [0] https://www.theatlantic.com/health/archive/2013/01/study-wanting-things-makes-us-happier-than-having-them/267216/ https://www.theatlantic.com/health/archive/2013/01/study-wan...
  - dgellow 6y ago
    Regarding lotteries, yes, with one difference, at least based on my personal experience: where I'm from state lotteries have to distribute all their gains to local charities, associations, sport clubs, etc. In fact they are the largest supporter of small associations. Because of this you don't have the risk of making the few people managing the lottery rich while everybody becomes poorer, it's more a way to gamble small amount of money and feel that you support local stuff. It's not for me but that doesn't sound too bad to be honest. I don't know about the US.
GhostVII 6y ago
I think the problem with schemes like this forex one is that you can legitimately make money in a fairly low risk way if you are selling the training/entry fee. You just pay $50, or $200 or whatever to be a part of the org, and then convince a bunch of people that you are getting rich off of forex and that they need to buy in as well. The people who lose are the ones who actually try and trade forex, rather than selling courses since they are paying an upfront fee to participate in a 0 sum game. Of course at some point you run out of customers and it collapses, but there are a lot of people in the world who are interested in getting rich off trading.
- deleted 6y ago
  [deleted]
fsloth 6y ago
Pyramid schemes, MLMs, and Ponzi schemes are popular also in "developed" countries if the operator finds an unfamiliar topic under which to run their scam. The early adopters are also generally equally fervent in supporting the scam and believing "it will work in the end". For example, Finland, one of the top performers in Pisa scores had a famous scam using -yes - foreign exchange trading as it's angle "https://en.wikipedia.org/wiki/WinCapita https://en.wikipedia.org/wiki/WinCapita
- bluedino 6y ago
  MLM is hugely popular with certain immigrant populations and religions in the US.

neutronicus 6y ago

I don't know why that's strange, it's basically the same as GME was over here

nwah1 6y ago
Is. GME is still going.
penagwin 6y ago
I don't think it's fair to call the GME short squeeze a scam, it was just a community taking advantage of the mathematics at the time. There wasn't any misleading information or false promises, just people FOMO'ing in with the bubble. EDIT: Also GME is at 240, it's not even a short squeeze anymore it's just bizarre
- throwaway8581 6y ago
  The small kernel of truth at the heart of it makes that much better of a scam. A pump and dump works better if in the pump stage, you have a good sounding reason.
- PragmaticPulp 6y ago
  Did you see the posts on WSB and /r/stocks about the claimed AI model that predicted the price would go to $100K? The original short squeeze narrative wasn’t really honest or accurate in the way it was presented. It was the narrative and the hype that drove the price up, combined with some gamma squeeze. The narrative about the “Mother Of All Squeezes” as they keep referring to it is not accurate.
  - penagwin 6y ago
    I guess but then again there's almost 10 million people now on WSB - and people can say anything. I'm not sure how this is different from say bitcoin, where I've heard estimates of "100k by the end of the year" since 2016
    - PragmaticPulp 6y ago
      You’re exactly right. Bitcoin investors make their money by convincing people to buy Bitcoin and never sell it (HODL). Before anyone claims it’s the same for stocks: It’s not. Stocks are an actual claim on underlying businesses, their cash flows, IP, and their assets. Bitcoin’s attraction is that it has no underlying fundamentals to compare against, so proponents can say it’s going to whatever price they want and no one can point out how silly that is. As long as people continue buying, the price goes up. Why are people buying? Because the price goes up.
      - scsilver 6y ago
        Yeah but these bitcoin HOLDrs are also convincing JP Morgan, BNY Melon. Surely these professional financiers aren't unsophisticated ponzi scheme victims? https://www.wsj.com/articles/bitcoin-to-come-to-america-s-oldest-bank-bny-mellon-11613044810b https://www.wsj.com/articles/bitcoin-to-come-to-america-s-ol... https://www.bloomberg.com/news/articles/2021-02-25/investors-could-add-up-to-1-of-bitcoin-to-mix-jpmorgan-says https://www.bloomberg.com/news/articles/2021-02-25/investors...
      - panarky 6y ago
        > Stocks are an actual claim on underlying businesses, their cash flows, IP, and their assets. This is not true. If you buy a share of GOOG, you have zero claim on any of Alphabet's cash flows or assets. The company doesn't pay a dividend and doesn't expect to pay a dividend in the future. So there's no income potential. There is no scenario under which you can convert your share into any of the company's intellectual property or physical assets. Your share doesn't even give you the right to vote on anything. There is only one thing you can do with your share, and that's sell it to someone else. So the only conceivable purpose in buying GOOG stock is the hope you can sell it to someone else for more than you paid.
Nextgrid 6y ago
The GME craze doesn't rely (or at least doesn't appear to) on people joining and perpetuating the scheme. I'm not aware of any long-term meme-stock trading "strategies" being peddled around - it's pretty clear that it's mostly gambling and people are simply making one-off bets. On the other hand, the various "trading" schemes (whether Forex or crypto or binary options) typically rely on the promise of long-term, sustained profits, buying various courses or trading tools and referring other people to it.
- throwaway8581 6y ago
  The GME craze absolutely relies on people joining and perpetuating the scheme. The price only goes up because Reddit-tier idiots keep buying. Instead of old school pump tactics, the pumpers used memes and hivemind manipulation, but it's still just a standard pump-and-dump. The "short squeeze" was the kernel of truth that it made it all the easier to sell idiots on the scam.
- PragmaticPulp 6y ago
  > The GME craze doesn't rely (or at least doesn't appear to) on people joining and perpetuating the scheme. Yes it does. The entire WSB narrative encourages everyone to buy more GME and never sell it. They’re not doing this as a favor to readers. They’re doing it because encouraging others to buy and hold is what drives the price up. Their “mother of all short squeezes” theory doesn’t match reality at all.
  - vmception 6y ago
    I love how the options spread traders are flying completely under the radar. I have never seen a more lucrative spread market. Every time these diamond handers have this thing range bound for a few days, spread traders are making like how many percent? A hundreds? Sure these occasional blow offs can wreck the position, but its limited risk.
- vmception 6y ago
  It does. GME doesn’t issue dividends and they will need to sell stock to change course, this requires even more new investors than now to perpetuate. There is an arbitrary distinction between pyramid schemes and respected financial realities. It isn’t really useful to draw the line, just play the game or don’t.
adventured 6y ago
> it's basically the same as GME was over here Still is. GME was $2.50-$20 across years. Now it's magically $239 (up 22% as I write this); up ~500% in ten trading sessions or so. It's a twisted joke on a whole lot of amateur investors that think they'll be the ones to successfully navigate the pump & dump and get out before it crumbles. The party will no doubt continue until the music stops (treasury yields rise too high).
throwaway8581 6y ago
People replying to you claiming that the GME hype wasn't a scam is just great proof that the suckers will always be with us.

deleted 6y ago

[deleted]

liaukovv 6y ago

Politicians have an advantage when joining it

dgellow 6y ago

People often believe they will be able to leave before the pyramid crashes. Which of course doesn’t make sense, statistically it’s very clear the vast majority will lose everything when the insiders start to crash out or are arrested, with no way to get their money back when everybody is rushing to leave the scheme. The common say is that most car driver believes they are above average. ¯\_(ツ)_/¯

wayneftw 6y ago
> ...statistically it’s very clear the vast majority will lose everything... The same is true for state lotteries and other forms of gambling, but many people continue to participate. I think of it like buying useless items too. "The state of anticipating and desiring a product may be inherently more pleasurable than product ownership itself." [0] This is very similar to gambling where you are essentially paying for the opportunity to feel hope. [0] https://www.theatlantic.com/health/archive/2013/01/study-wanting-things-makes-us-happier-than-having-them/267216/ https://www.theatlantic.com/health/archive/2013/01/study-wan...
- dgellow 6y ago
  Regarding lotteries, yes, with one difference, at least based on my personal experience: where I'm from state lotteries have to distribute all their gains to local charities, associations, sport clubs, etc. In fact they are the largest supporter of small associations. Because of this you don't have the risk of making the few people managing the lottery rich while everybody becomes poorer, it's more a way to gamble small amount of money and feel that you support local stuff. It's not for me but that doesn't sound too bad to be honest. I don't know about the US.

GhostVII 6y ago

I think the problem with schemes like this forex one is that you can legitimately make money in a fairly low risk way if you are selling the training/entry fee. You just pay $50, or $200 or whatever to be a part of the org, and then convince a bunch of people that you are getting rich off of forex and that they need to buy in as well. The people who lose are the ones who actually try and trade forex, rather than selling courses since they are paying an upfront fee to participate in a 0 sum game. Of course at some point you run out of customers and it collapses, but there are a lot of people in the world who are interested in getting rich off trading.

deleted 6y ago
[deleted]

fsloth 6y ago

Pyramid schemes, MLMs, and Ponzi schemes are popular also in "developed" countries if the operator finds an unfamiliar topic under which to run their scam. The early adopters are also generally equally fervent in supporting the scam and believing "it will work in the end". For example, Finland, one of the top performers in Pisa scores had a famous scam using -yes - foreign exchange trading as it's angle "https://en.wikipedia.org/wiki/WinCapita https://en.wikipedia.org/wiki/WinCapita

bluedino 6y ago
MLM is hugely popular with certain immigrant populations and religions in the US.