Pyramid schemes — so simple even a child can understand them

Today, I told my children, who are 11 and 12, about pyramid schemes.  Since it’s always easiest for me to focus on people, I started my story with the first famous American pyramid schemer:  Charles Ponzi, who gave his name to the whole racket.

I explained the Ponzi scheme to the kids in the simplest of terms, using very easy math:  I told them that Ponzi promised his first investors that, if they gave him their money, he would give them double that amount back.  (I actually don’t know if he promised to double the money, but it was an easy concept for the kids to grasp.)  Excited by the prospective of money for nothing, these people readily handed their money to Ponzi.  They were the first tier of investors.

Ponzi then went out and found a larger number of investors, who also gave him their money.  These were the second tier of investors.  He took the money he received from the second tier, and gave it to the first tier.  The first tier was very happy.  Having done nothing, they nevertheless doubled their investment.  Many of them came back for more, reinvesting their money, and joining the third tier of investors.  With the money from that third tier, Ponzi paid off, big time, to the second tier.

This went on quite happily for a while, I told the kids, but then something inevitable happened:  Ponzi stopped finding a sufficient number of new investors whose fresh funds could pay off his old investors.  Since Ponzi was just moving money around — he was not providing a service or creating goods — the only thing that kept the money flowing was fresh blood.

So, I asked my attentive little audience, what happened then?  My 12 year old was quick with a reply:  “The whole system collapsed.”  Smart child.

Before I was even able to go on from them, my 11 year old, eyes suddenly widening, announced, “That’s like what the government does.  It takes money from people who work, and gives it to people who don’t work.”   Really smart child.

(By the way, I am absolutely not making this up.  That’s the story I told, and that is verbatim how my children responded, no editing, no augmenting.)

I leave you with a replay of Chris Christie, who speaks about the Day of Reckoning that will be inevitable unless we sharply turn away from the Progressive government’s giant Ponzi scheme:

Oh, I have one more “by the way,” apropos Gov. Chris Christie.  As you know, I believe lots of uninformed Americans voted for Obama, not because of his qualifications, but because they were swept away by the rapture of voting for the first black president.  I also read somewhere that a candidate in Texas is running, not on her actual qualifications for the job, but on her promise to the voters that, if they vote for her, she’ll be the first transgendered whatever it is she’s running for.

I mean, honestly, the way the media frames elections lately, the most important thing is to push the identity politics side of someone’s candidacy as the primary consideration, trumping all other matters.  So how about all of us starting a campaign for Chris Christie, promising Americans that, if he wins, he’ll be the first rotund president in the 21st Century, and the first since William Howard Taft?

After all, considering how badly people of weight are treated in America, it seems to me that Christie is already well on his way to wearing the victim moniker so beloved of the press.  The only problem, of course, is that Christie might, just might, be offended by victim/identity politics status, and might actually want to run on issues and competency.

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  • Libby

    Great description of a ponzi scheme – will use it when my son is older.
    As for the media’s framing of candidates, if I hear “compelling life story” one more time I’m going to puke. We heard this a lot about Obama, and then again for Sotomayor. I swear this is code for “non-white person with a non-standard upbringing and/or lifestyle”, which somehow makes up for his/her lack of qualification for the job.

  • Gringo

    Christie’s opponent last year made many references to Christie’s  being fat, sometime obliquely. Here is Allan Sherman, another famous fatso, performing “Hail to thee, Fat Person (You kept us out of war.)”
    That was a good explanation of a Ponzi scheme. Many have forgotten that a child’s most important teachers are parents.

  • Ymarsakar

    They have a wise and experienced observer of human nature as their mom.
    These lessons will last them a life time. Much of the Leftist agenda concerns indoctrinating children to cooperate with con schemes. When these children are taught how to recognize cons rather than be guilt tripped into them, they will now be able to resist Leftist advancements when before they would have backed down at encountering “in your face” tactics. They would have shyed away from an unfamiliar subject. But when learning it in their early teens, once they hit college they will have spent a significant portion of their self-aware time on Earth being aware of these issues. It will not take them by surprise.
    And surprise is often the Left’s best shock weapon. Something they use to get past all defenses, because people don’t have time enough to erect those defenses at the speed of the blitzkrieg.


    WOW, Book, you are already reaping the rewards of your hard work. Those light bulb moments are wonderful to see in children. It’s euphoric.
    The marketers and media no longer present a candidate. It’s more like selling and hyping in the style of  a MGM or a Sony film.
    Okay, I am finished with my little riff but not the point. The point is that too many voters have come to expect a young dashing male, who can sweep the leading lady off her feet, Somewhere between Rhett Butler and Johnny Depp or a Mr. & Mrs. Smith (Angelina Jolie and Brad Pitt) replete with whomever is most current doing the soundtrack. These voters have no concept or no tolerance for anyone that is not ‘Hollywood’ with a Hollywood cause  who conforms to their surreal concept of ‘real’.
    They don’t have Book for a mom and a Ponzi scheme, would make a great reality show.
    How do we reach an audience, who has settled for dry stale popcorn in the dark and introduce them to home made with real butter.

  • Ymarsakar

    Christie may be fat but I’d have no problems training him in killing men and women in H2H.
    Most or all politicians exercise the power of life and death through intermediaries. They order it done. Few, perhaps none, can actually get it done using their own hands. So it’d give “fat” Christie here an incredible advantage. An advantage that none of them would ever know about it, because you can’t tell just by looking how much knowledge in death and killing a person has.

  • Ymarsakar

    ” That was a good explanation of a Ponzi scheme. Many have forgotten that a child’s most important teachers are parents.”
    nature, for one, has not forgotten. After all, the ability of a parent to pass down core survival skills and knowledge determined whether the genes of that parent would survive to procreate. Nature was very finicky and strict on this matter.
    Fail to teach the next generation how to survive? In the ground you go. Evolutionary dead end. It’s why humans love stories. And why children are programmed to learn by hearing oral traditions, bed time stories, etc.

  • Mike Devx

    Ymar says,
    > And why children are programmed to learn by hearing oral traditions, bed time stories, etc.

    In fact, we’re all programmed, throughout our lives, to learn by hearing stories.

    Jesus most effectively taught in parables.  I’ll take the parables over a dry list any day.

    Give someone a short list of “10 life lessons”, and they’ll agree with it, find the list admirable, and then mostly forget.

    Construct a compelling story around each life lesson, and they’ll remember them all, and love em.

  • ConnectTheDots

    Thanks for the great lesson about how to teach our children.
    I have been trying to educate my family on the leftist leanings of almost all popular media. I was trained  in film school to see, with a cynical eye, the motivation beneath the surface. Watching an ad spot to see what the producers were trying to communicate, rather than just enjoying the story. It was great training, although I have to admit at the time (30 years ago) i was oblivious to politics.
    And more recently, watching masters like Glenn Beck, Michelle Malkin and Rush Limbaugh dissect motivations has been a great lesson.
    The interesting side effect is that my 12-year-old daughter has an amazingly clear view of things, as your children do. I’ll explain a common societal problem to her, and she’ll come back with the simplest, most direct common sense approach. EVERY time I see obama, or pelosi, or reid, or some other illiberal speaking on the tube (and I try to limit her exposure to prevent any sort of nausea), I’ll ask her what he/she just said, and my daughter will quickly explain what they really said. Inevitably, I’ll hear the word “stupid” used in the explanation of one of their policies or “solutions”.
    Compare this to my wife’s nephew, a relatively recent graduate of a midwest liberal arts college (Miami University in Ohio). He actually worked on the obama campaign (as a paid employee) and has been working in some capacity or another for the dhimmicrats since. He’s now collecting unemployment compensation.
    When I discuss issues with him, there is NEVER a real exchange of understanding of policies. As soon as I try to get at a discussion of real policy, cause & effect, he does the typical liberal turn-around “Bush did this” or that’s racist. No discussion, just changing the direction. I have never been able to get him to espouse the logic behind any policy. As your tagline says, he has a conclusion then makes up the “facts” to fit that conclusion.
    If we can get more children to understand concepts like my daughter and your kids, perhaps America has a fighting chance. I suspect that many, many more are like my wife’s nephew and that we are doomed unless we make a change. Quickly.

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  • shae

    Pyramid schemes are legal. Ponzi schemes are not. One has tiers of people making money for themselves, while giving a cut to the top tier. The other has investors merely invest in exchange for return rate, and they keep going back.