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Theranos was fraud. She made material lies about what the machines do. Ponzis are accounting malpractice that don't even necessarily involve defrauding anyone

Theranos was fraud. She made material lies about what the machines do. Ponzis are accounting malpractice that don't even necessarily involve defrauding anyone. It's a problem if you're going to call everything that goes south a ponzi scheme, because it elides failure modes and dulls peoples ability to distingush and analyze bad situations. Is social security, for example, a ponzi scheme?

iancmceachern 3y ago
Didn't Ponzi make material lies about what his company did also? It just seems like a dubious distinction. More than what they did being different, I think the laws and terminology around those laws are different now. I don't think there is much pragmatic difference, mostly just semantics no?
- danielmarkbruce 3y ago
  There is a meaningful difference. A ponzi scheme involves: schemer takes money from Mr. A. At a later date he takes money from Mr B. He gives some of the money from Mr. B to Mr A, and tells Mr. A that it's "returns". He tells Mr B. all is fine. Then Mr C comes along and his money is given to Mr. A and Mr. B, as "returns". This continues. It's a very specific type of fraud. Most fraud isn't a ponzi, just like every injury isn't a broken arm. It's silly to go around calling all injuries a broken arm.
- axpy 3y ago
  It's not because A ==> B that B ==> A. A Ponzi scheme is a fraud but a frauds doesn't necessarily imply a Ponzi scheme. That's is not just semantic, it's a logic falacy.
  - throwawaymaths 3y ago
    I think it's still considered a ponzi scheme if you tell people exactly what you are doing.
    - epgui 3y ago
      I believe that may be correct, although in practice there is often/usually/historically-always (?) deception involved, because presumably no morally competent adult would willingly give their money to an honest Ponzi unless they knew they stood to benefit by being one of the first to pull out. But as you point out, I don't think deception per se is really the defining feature of the Ponzi.

iancmceachern 3y ago

Didn't Ponzi make material lies about what his company did also? It just seems like a dubious distinction. More than what they did being different, I think the laws and terminology around those laws are different now. I don't think there is much pragmatic difference, mostly just semantics no?

danielmarkbruce 3y ago
There is a meaningful difference. A ponzi scheme involves: schemer takes money from Mr. A. At a later date he takes money from Mr B. He gives some of the money from Mr. B to Mr A, and tells Mr. A that it's "returns". He tells Mr B. all is fine. Then Mr C comes along and his money is given to Mr. A and Mr. B, as "returns". This continues. It's a very specific type of fraud. Most fraud isn't a ponzi, just like every injury isn't a broken arm. It's silly to go around calling all injuries a broken arm.
axpy 3y ago
It's not because A ==> B that B ==> A. A Ponzi scheme is a fraud but a frauds doesn't necessarily imply a Ponzi scheme. That's is not just semantic, it's a logic falacy.
- throwawaymaths 3y ago
  I think it's still considered a ponzi scheme if you tell people exactly what you are doing.
  - epgui 3y ago
    I believe that may be correct, although in practice there is often/usually/historically-always (?) deception involved, because presumably no morally competent adult would willingly give their money to an honest Ponzi unless they knew they stood to benefit by being one of the first to pull out. But as you point out, I don't think deception per se is really the defining feature of the Ponzi.