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How to Quickly Identify a Pyramid Scheme with Simple Math
Pyramid schemes have been around almost as long as humanity has walked the earth, but it wasn’t until recently when Bernie Madoff scammed some of the richest and most influential people on earth did pyramid schemes land on the front page of the New York Times business section.
Most schemes aren’t as complex and convoluted as Madoff’s.
Most use what is known as a 3X4 matrix. If you believe that you’ve stumbled upon one of these pyramid schemes, chances are, it won’t be around very long.
Simple math shows that by the time the 3X4 matrix scheme gets to the fourth level, things begin to break down. The amount of money coming in can’t keep up with the amount that’s supposed to be going out.
Of course, most schemes are accompanied by rampant lying and other dishonest practices, but for the sake of this article, a pyramid scheme based on a 3X4 matrix cannot sustain itself past the fourth level. You would have to start denying earned payouts to some to pay others.
Things are a bit different when you have the connections and capital that Madoff did. You can buy time and make excuses while you attempt to bring in more new investors and create additional cash flow. Pyramid schemes are an unfortunate fact of life in today’s society.
You can beat these traps by asking questions, doing your research and employing some basic math to see that they are an unsustainable way of doing business.
Learn more about pyramid schemes and more math detective work, check out the full article.
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