If a pyramid runs forever, is it still a pyramid?

[saltednuts]

I have been wracking my head trying to figure this out. I've been watching some schemes on cryptocurrencies and even though their complexity is very high, many all boil down to the same basic principle: a ponzi.

What my question is seeking to address is whether these ponzi schemes are indeed ponzi if a surrounding business takes advantage of it.

Ok, I did not make myself clear.

Let's think 3Dimensionally beyond the simple MLM, ponzi.

1. The pyramid is a hierarchical structure right? Now, imagine it being surrounded by legimate businesses. I mean most "complicated" and smart ponzis are like that and can run for decades. Think Bernie Madoff.

2. From the Ponzi, legitimate and real businesses are ran. In fact, an entire eco-system can be built around the simple ponzi. From investing in other legitimate investments to small brick and mortar SMEs, ponzi money can "expand" to so many horizons.

What are examples?

- apparel
- consulting services
- video content
- tradeshow and "TEDtalk" like events with pricey tickets
- VPN hosting services, etc, etc.

These allied businesses, are not in and of themselves "ponzi" but may have been capitalized with ponzi money. Now, if any of these endeavors "takes off" and perpetuates the ponzi or prolongs it, doesn't that make the ponzi not a ponzi?

[stadus]

I think there is no pyramid that will run forever, either they get bankrupt in the long run or they get stopped by the government.
I know some long run ponzi scheme which ran for 5 years already with millions of members, they give a return of at least 30% per month and they have a lot of business under the name of the investment scheme, there was no complaint from clients but the government sees this is a big risk as they offer a big percentage which they cannot justify properly, the stand of the government is no investment can give you a consistent 30% per month.

The government job here is to prevent if it's still possible so stopping a ponzi could end it's operation abruptly.

[timerland]

I have been wracking my head trying to figure this out. I've been watching some schemes on cryptocurrencies and even though their complexity is very high, many all boil down to the same basic principle: a ponzi.

Are you talking about cryptocurrencies themselves, or investment schemes that are launched that accept payments in BTC?

Most of the ponzi schemes that exist online are extremely obvious to spot, and I think a bit of common sense is all you need honestly.

These allied businesses, are not in and of themselves "ponzi" but may have been capitalized with ponzi money. Now, if any of these endeavors "takes off" and perpetuates the ponzi or prolongs it, doesn't that make the ponzi not a ponzi?

What it boils down to is whether or not a business's traditional operation model of selling their products or services alone is capable of sustaining itself, without the need for any further investment from new funding sources all the time in order to make their profits in the long run.

There should also be a clear distinction between affiliate marketing, and ponzi, that you should be aware of, imo. There are certain companies like Amway that sort of sits somewhere in between, it's best to just avoid them.

Philosophically, do they consist a ponzi type structure? Yes, by strict definition. But they might not be defined as such within legislation.

[Schirer]

Help me understand if I understood you correctly.

Basically your idea of enhanced pyramid scheme is that money from this pyramid is invested in other businesses ?
In this case, i do not think that it is still ponzi, This is just illegally obtained money invested elsewhere.

[shield132]

There hasn't been such pyramid and will never be. There are a lot of reasons:
1. People who invest in pyramids usually have low economic situation.
2. Most of them aren't smart since they blindly believe what ponzi companies offer are real and they are so smart that were able to find such a great deal.
3. None businessman will invest in such scheme, so pyramid is far from real investors.

[MTL4]

There hasn't been such pyramid and will never be. There are a lot of reasons:
1. People who invest in pyramids usually have low economic situation.
2. Most of them aren't smart since they blindly believe what ponzi companies offer are real and they are so smart that were able to find such a great deal.
3. None businessman will invest in such scheme, so pyramid is far from real investors.

Seems like the folks that Bernie Madoff fooled with his pyramid scheme violated all three of these reasons.

[The Sceptical Chymist]

Think Bernie Madoff.

I have to tell you, that's the very first thing I thought.  Madoff ran his Ponzi for probably an unprecedented number of years, and yet it finally came crashing down.  I'm pretty sure all pyramid/Ponzi schemes fall apart eventually, because they all rely on obtaining new investor funds, and during times of economic crisis (like a recession or depression), people stop handing over their money to the Ponzi-runner.  It always happens.

So the question in the title is a bit off.  A pyramid won't run forever.  But assuming it did, then yes, it's still a pyramid scheme.

3. None businessman will invest in such scheme, so pyramid is far from real investors.

Oh, that's so wrong.  Some of these scammers are very convincing--which is why they call them con(fidence) men, and they certainly can and have suckered in high-wealth investors and otherwise very smart people.

[Ryker1]

There hasn't been such pyramid and will never be. There are a lot of reasons:
1. People who invest in pyramids usually have low economic situation.
2. Most of them aren't smart since they blindly believe what ponzi companies offer are real and they are so smart that were able to find such a great deal.
3. None businessman will invest in such scheme, so pyramid is far from real investors.

Well, all stated above was right but I have some addition to your statement.
4. They are greedy people who want an easy process of profit.
The pyramiding scheme will not long last until their fund pool will have a big amount and run away. The circulation of money is through the members who participated with. Indeed, after the fund has collected and it is big enough for them they are suddenly disappeared. For sure investors that they fooled probably cry.

[BrewMaster]

yes it is and it is also considered a scam no matter what.
the reason why it is a pyramid scheme and is a scam is simply because of its design. if you start thinking realistically about a pyramid scheme you can see why it is a scam pretty clearly. in this scheme you first throw yourself in a ditch and in order to get out of that ditch you have to pull others down where you are so that you could put your feet on their head and pull yourself out.
the bigger the ditch the more people need to be fooled and the fuller the ditch.

[LeGaulois]

There hasn't been such pyramid and will never be. There are a lot of reasons:
1. People who invest in pyramids usually have low economic situation.
2. Most of them aren't smart since they blindly believe what ponzi companies offer are real and they are so smart that were able to find such a great deal.
3. None businessman will invest in such scheme, so pyramid is far from real investors.

I owned a popular blog for some years monitoring scams in 2 industries. With the years, I can tell you scammers have succeeded in developing pyramids that are sometimes very complex or even an informed person would not notice anything.
I've also seen a lot of people failing in. No matter their education level and no matter their economic situation. From the poor guy, the average Joe with a 6 digits loan, people with high education, comfortable lifestyle, etc...

[1Referee]

I don't think so. In the long run, even legitimate businesses will be confronted with less demand, weaker local economy, or a global crisis the way we had it like a decade ago. No business is safe from that and as result a lot of these will fail. In the process whatever that can be seen as a scheme will collapse too.

The thing with schemes is that once they fail, others pop up with a few improvements here and there and continue where the rest didn't manage to continue. Schemes as a whole will continue pretty much for ever, but not in the way that one or more entities manage to stay operational more than a decade or whatever other period of time.

[dothebeats]

1. The pyramid is a hierarchical structure right? Now, imagine it being surrounded by legimate businesses. I mean most "complicated" and smart ponzis are like that and can run for decades. Think Bernie Madoff.

Multi-level marketing, as they call it. Ponzi schemes dressed as legitimate businesses by actually owning something they can sell, however their main profit maker is by means of inviting other affiliates into their schemes which would then pay off to become a member and sell those damned products. Yeah, it could work.

2. From the Ponzi, legitimate and real businesses are ran. In fact, an entire eco-system can be built around the simple ponzi. From investing in other legitimate investments to small brick and mortar SMEs, ponzi money can "expand" to so many horizons.

What are examples?

- apparel
- consulting services
- video content
- tradeshow and "TEDtalk" like events with pricey tickets
- VPN hosting services, etc, etc.

These allied businesses, are not in and of themselves "ponzi" but may have been capitalized with ponzi money. Now, if any of these endeavors "takes off" and perpetuates the ponzi or prolongs it, doesn't that make the ponzi not a ponzi?

This is not a ponzi anymore but rather a form of a legitimate business if they have been venturing and investing to other firms through which they can get their profit. Primarily, ponzis get their money from inviting people into the scheme and getting the money off of those newly-joined lads. But with other profit streams apart from affiliates, I don't think you can consider it as ponzi as they now have the means to pay off their so-called investors without depending on new affiliates for money.

But then again, no business is too big to fail, so no matter how this ponzi scheme fare, or how well it treads on the market, it will surely has its fall too.

[hatshepsut93]

Pyramid schemes, aka ponzi schemes fall because they don't produce anything, they don't generate profit, they just reallocate resources from bottom to the top, and they fall when there's not enough suckers on the bottom. So, under this definition a pyramid can never run forever.

But if a company produces something and has some pyramid-like structure, then it actually go on forever. Examples are MLM products, various referral programms and so on. So, it's just a matter of what we consider a pyramid - a ponzi scheme or just anything with multi-level tree-like structure?

[sunsilk]

Pyramid scheme is bound to collapse regardless of how long it has been running, they will collapse. Wise investors wouldn't be attracted with sweet words by their 'wolf in sheeps clothing' tactic as they are venturing with 'legit' business.

It's all about the show to attract more investors. Think of it that legit businesses are even have times of failure and these scams are putting into the minds of their investors that they are there to stay mostly with no signs of failure? no way.

[Kemarit]

I think there is no pyramid that will run forever, either they get bankrupt in the long run or they get stopped by the government.

This one. I don't think that an illegitimate business can run forever. Sure they can hide and camouflage it, but sooner or later they will be unmasked.

I know some long run ponzi scheme which ran for 5 years already with millions of members, they give a return of at least 30% per month and they have a lot of business under the name of the investment scheme, there was no complaint from clients but the government sees this is a big risk as they offer a big percentage which they cannot justify properly, the stand of the government is no investment can give you a consistent 30% per month.

The government job here is to prevent if it's still possible so stopping a ponzi could end it's operation abruptly.

That is the big factor here, the government, in our country I have heard a lot of pyramiding scheme since I was a little, and no matter how they try to hide, it will eventually fall. Either the people behind the bottom is the scheme complain because they have not received their commission, or the government will step in and crush the scheme for good.

And the loser? Those investors who fall for this kind of trap and nothing has changed for the last 40-50 years.

[kaya11]

I have been wracking my head trying to figure this out. I've been watching some schemes on cryptocurrencies and even though their complexity is very high, many all boil down to the same basic principle: a ponzi.

What my question is seeking to address is whether these ponzi schemes are indeed ponzi if a surrounding business takes advantage of it.

Ok, I did not make myself clear.

Let's think 3Dimensionally beyond the simple MLM, ponzi.

1. The pyramid is a hierarchical structure right? Now, imagine it being surrounded by legimate businesses. I mean most "complicated" and smart ponzis are like that and can run for decades. Think Bernie Madoff.

2. From the Ponzi, legitimate and real businesses are ran. In fact, an entire eco-system can be built around the simple ponzi. From investing in other legitimate investments to small brick and mortar SMEs, ponzi money can "expand" to so many horizons.

What are examples?

- apparel
- consulting services
- video content
- tradeshow and "TEDtalk" like events with pricey tickets
- VPN hosting services, etc, etc.

These allied businesses, are not in and of themselves "ponzi" but may have been capitalized with ponzi money. Now, if any of these endeavors "takes off" and perpetuates the ponzi or prolongs it, doesn't that make the ponzi not a ponzi?

In the end the people that would take most of the damage our the people below, in order for a ponzi or the pyramid to exist is to remove all of the topnotch asses. How would you do that, it only exist in movies where protagonist saves the world from the tyrant ruler of the world. It doesn't exist at all, now we just have to go along with it and make the most out of it, squeeze the juice while it is available or leave it to others and go on with whatever business you doing not including crypto currencies or whatsoever ponzi schemes you know of.

[CryptopreneurBrainboss]

I believe you're mistaking all Multi Level Marketing businesses for Ponzi scheme. A business is said to be a Ponzi scheme when it doesn't deal on any product but promises quick high return of investment meanwhile MLM are business that has to do with network marketing. Now since most MLM actually deals with sale of product you can't consider them Ponzi but they all operate using the  pyramid like system. Most Ponzi disguised themselves as MLM in order to decieve victim info investing with them now it's left for you to be smart to differentiate between the real and the fake.

This is the same mistakes the government of my country is making, they mistake bitcoin for Ponzi scheme since they feel you have to buy from an earlier investor and sell to a later investors to make profit and since most of the scams (Ponzi schemes) in the country make use of bitcoin as a payment option they automatically think bitcoin is a ponzi scheme.

[arpon11]

It actually depend on what we see as a pyramid scheme and the law and monetary policy around the country of residents of the scheme. If a scheme is paying high interest that is more than the interest rate of a nation I classified such scheme as a Ponzi or pyramid scheme and at that one day it is going to run into problems and the governments might close it down because it is against the laws of the land.
I have seen many Ponzi schemes that lasts more than two to three years and people become comfortable with them and one day one thing will happen and you will see them close down and investors money will be at risk.

[Kakmakr]

Eventually the "new" money runs out and the previous investors cannot be paid and this is when these so-called Ponzi schemes collapse. It often happens that one or two large investors extract their investment capital and when this happens the cashflow dry up and the payments gets delayed or the people behind the Ponzi scheme cut and run.

As long as the feeder capital can support the payments and new capital comes in to support that, the Ponzi scheme will run indefinitely.  When legitimate businesses can generate enough capital to pay the investors, this Ponzi scheme will continue forever! 

[michellee]

The Ponzi pyramid will run in a short time, they cannot exist for a long time. Only a few people who can survive and they still ask for the other people to join under them. That person will search a new member no matter how long they will need to find. Ponzi will still Ponzi, no matter if they can run in a long time but I think that there will be many new people who can always join under them because people are interested with the fast money from the Ponzi. They don't think that the Ponzi will end or the company will scam people, they join because they want to make money in a short time.