183: Business Solutions

[Keith]

"Nobody knows you better than you."

[teerts]

I remember that scheme! I didnt send money, but I seriously thought about it! Then I chose not to play because i figured, what if i just send out the letters without sending money to the people on the list first? and thought it was a trick.

This is why it doesnt work:
http://members.impulse.net/~thebob/Pyramid.html#Finite

The pyramid must fail because there is a finite and limited number of potential participants.
Pyramid schemes depend on bringing in an exponentially-growing number of new participants. I've used the term exponentially several times already, perhaps I should explain it. Where n represents some number, if you start with one person, who gets n people to join, and each of those people gets n more people to join, and so on, you have the total number of people growing by powers of n. Even where n is a fairly small number, the total number of people involved grows to amazingly huge numbers without very many steps being required to reach these huge numbers. Indeed, it is these huge numbers, which you are led to believe represent the number of people who will each be sending you $5 or whatever, that makes pyramid schemes attractive.

But these huge numbers create a problem. There are somewhere between five and six billion people in the world. Let's suppose that every one of these people could be induced to join a particular pyramid scheme. For how many levels could this scheme run before it failed, for lack of new participants? You'll be amazed when you see how quickly the number of required new participants grows to exceed the population.

In the example above, I assumed that each person who joined would bring in ten new people. How many levels can be supported by a population of five to six billion? Let's count them...

Level People in Level
1 1
2 10
3 100
4 1,000
5 10,000
6 100,000
7 1,000,000
8 10,000,000
9 100,000,000
10 1,000,000,000

That's ten levels, counting the one person at the top who started it. By the time these ten levels are filled, there will be a total of 1,111,111,111 participants. The eleventh level would require 10,000,000,000, or ten billion new participants to fill in. But there aren't that many people in the world. There's only between five and six billion, minus the somewhat over a billion who've already joined. Most of the billion people in the tenth level will not be able to get any new participants below them, and will therefore make no money at all. And of course, none of those who join in the eleventh level will get any new participants below them. There aren't enough people to fill in the eleventh level, much less to start a twelfth level below that.

At this point, the pyramid collapses. And when it does, a solid majority of those who had joined will not have made any return at all. They will have paid their money to get in, but the promise that they will profit as people join below them will never be fulfilled.

Of course, the number of levels that can be filled depends on how many new participants, on average, are brought in by each previous participant. But even if each participant brings in only two new participants, the pyramid will collapse in about 32 or 33 levels (still assuming, of course, that you can get all five or six billion people in the world to join) with most participants having lost money.

No new wealth is created, the only wealth gained by any participant is wealth lost by other participants.
You need to understand that all legitimate business activities, in some way, create wealth, or contribute to the creation of wealth. When you create a product, that is worth more than what it cost to produce, you've created wealth. When you perform a service, which is worth more than it cost to provide, you've created wealth.

If you spend a dollar for a lemon, some sugar, and some water; and then use this to make sufficient lemonade that you can sell twenty servings for ten cents each, then you've created wealth. You've taken ingredients worth a dollar, and used them to create a product worth two dollars. You've created a dollar's worth of new wealth.

Pyramid schemes produce no goods of any significance, and they provide no service. They create no wealth. All they do is move existing wealth. Every dollar that one person gains through such a scheme is a dollar that someone else has lost.

Do not be fooled if the scheme includes some form of reports or lists or other pieces of information that you are supposedly buying from those above you, and selling to those below you. In nearly every case, these intangible products have no value imputed to them, other than that which can allegedly be gained by copying and reselling them. The purpose of these reports is not to provide valuable information, but to provide a pretext by which one participant in a pyramid scheme collects money from other participants.

[Added 23 April 2004]
Here's another way of looking at it. Suppose there was a scheme where everyone who joins contibutes a dollar, which is then put into a box. No money is put into that box except the dollar from each person who joins the scheme. Is there any way to redisitribute the money that is collected into this box so that everyone who contributed money into it gets more back than what he put in? Let's suppose that a hundred people have joined this scheme. This means that there is $100 in the box, and 100 people expecting some kind of payout. If the money in the box is equally distributed among all the participants, then each will get back only $1, the exact amount that he paid to join. You could give $10 to each of 10 people, but that would leave 90 people who get back nothing, and who have only lost the dollar that each had paid to join. You could give the whole $100 to one person, but that would leave 99 people who get nothing back. There is simply no way for everyone to get back more than they paid in. In order for anyone to get back more, someone else has to get back less. Anyone who gains in such a scheme does so at the expense of others who have lost.

The same holds true of all pyramid schemes, Ponzi schemes, straightline matrix schemes, and anything else that is in any way similar. It is mathematically impossible for more to be taken out of any such scheme than what is put into it.

[Nick Postagulous]

Dammit all, Teerts, I had that same exact page to post.

Looks like bob is the first hit on google, eh?

Also, brilliant way to do the show. With two recorder things, but I hear Keith's voice as an echo on Chemda's side, I think. But, I don't think she hears the delay, or maybe she hears the echo. But she seems to respond before the echo ends.

Oh,, and Blackjack is the only gambling game you can do for a living, or so I've heard.

[PapaDoc]

The echo wasnt so bad on Chemdas side, It turned up a bit on Keets end.

Call Jeff to give some tips on the gear!!!

[Nick Postagulous]

Dooce, you'ze crazy. Bwah ha ha ha.

R U mad?

() yes
() no

Chek one

"Don't write emails drunk." - Teh Pope!!11!!!11one

[RW]

hey Deuce, you stupid pussy letter is almost as gay as your standup...ALMOST.

[mcd007]

You have to wonder what a couple who creates a nativity scene around their baby thinks of themselves. Britney, no one believed you were a virgin before, and they sure as hell don't think so now. You're not the holy virgin. And Kevin, sure you don't shave, you probably stink most of the time, and you usually dress like you've been wandering the desert for months on end, but you're no Joseph. You may look the part, but you're a long way from being the unwitting father of christ.

And your baby will not grow up to cure the blind or turn water into wine. If he has anything to do with wine, it will only be that he finds himself in a hotel room pouring expensive bottles of wine and chanpagne onto hookers' titties in between doing lines of coke.

But I could be wrong. I'm sure you're both model parents and your kid will grow up perfectly normal. I mean, you're doing what every normal parent would do by creating a religious scene of life-size donkeys, cattle, and wax people in the kid's bedroom. Perfectly normal. Really.

[deuce]

this is some sort of conspiracy, I deny ever writing such letter. this is just a ploy for keith to punch me in the face. IT WON'T WORK..

[deuce]

Originally Posted by RW

hey Deuce, you stupid pussy letter is almost as gay as your standup...ALMOST.

opportunity to put your money where your mouth is RW

[deuce]

Originally Posted by deuce

this is some sort of conspiracy, I deny ever writing such letter. this is just a ploy for keith to punch me in the face. IT WON'T WORK..

I bet it's cause I am a Jew, f--kin christians always start in with the Jew bashing this time of year. I killed your Lord, get over it.