The Pyramid Clubs which flourished a few years ago were another attempt to use the chain-letter principle, avoiding any use of the mails. Mr. A forms a club by phoning two friends, Band C, and invites them to a party at his home. Band C each invite two more guests, D, E, F and G, and these four each invite two more. The guest list looks like this:
The eight new club members on the last line each pay Mr. A $1 for the privilege of joining the club. Mr. A also has a list of eight names which he has arbitrarily selected if he is the originator of the scheme, or eight names of persons who are previous participants. He sends the $8 he has collected to the name at the top of the list, and then adds his own name at the bottom in the directory.
Then B and C each hold parties the next night, and each collects $8 from new members. Everyone on the original pyramids moves up to the line above and, four days later, there are eight such pyramids. As each new member reaches the top of the pyramid and holds a party and collects $8, he turns this over to the name at the top of the list, and adds his own name at the bottom. Each person who reaches the top of the list should receive $8 from 256 other clubs, a total of $2,048 profit on an initial investment of $1.
It sounds fine, but, like the chain letters, it never works, because too many people drop out and many others pocket the $8 they have collected instead of sending it along to the person now at the top of the list. And there's an even bigger Haw in the scheme--a real big one. Let's suppose that no one drops out and that everything works beautifully. There are 15 participants at the first party plus the person at the head of the list. The number of new members doubles each day thereafter until, at the end of two weeks, 262,143 persons are involved; at the end of three weeks there are 33,554,431 participants, and three days after that every man, woman and child in this country, Canada and some Latin-American countries, and about 12 million more be¬sides, are involved-a total of 268,435,455 Pyramid Club members. It is obvious that the whole scheme must collapse with a dull thud long before that point is reached.
Pyramid Club originators and members also forget that although they aren't violating any postal laws, the individual states have anta lottery laws. Arrest and conviction of a number of such promoters and an announcement by the Bureau of Internal Revenue that it would prosecute anyone who did not report money received from such a scheme put a crimp in the Pyramid Club operations.
Variations of the idea, however, continue to pop up with regularity.
A few years ago a couple of shrewd promoters with big ideas took in $50,000 with a Pyramid variation in which each participant was to purchase a $50 government bond and forward it to the name at the top of the list. A five-step chain, if unbroken, was supposed to bring each participant $31,250 in bonds, and the promoters told the suckers that the postal authorities wouldn't mind because the scheme would sell so many bonds. A great many salespeople attending merchandise conventions in Chicago were victimized by this one. And the authori¬ties did mind; it was still a lottery, and a crooked one to boot.
Another very good reason for not participating in get-rich-quick chain-letter and Pyramid Club schemes or any variation thereof is that besides getting swindled yourself you are helping to swindle your friends.
Article Source: http://www.articleated.com
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