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Why Do Poor People Love Ponzi Schemes?

Without a doubt, poor people are the most likely victims of Ponzi Schemes or any other questionable type of investment. While rich people invest in real estate, stocks and bonds; poor people invest in Ponzi Schemes and soon lose their hard earned money.

Of course, it is not only poor people who lose their money to Pyramid Schemes; neither is it only rich people who have made very good investments in real estate, the stock market, or other legitimate investments.

Nevertheless, Ponzi Schemes offer unrealistically high returns, and they know who their target audience is. You may have come across a Ponzi Scheme but perhaps failed to identify it.

What Are Ponzi Schemes?

Ponzi Schemes are businesses that take from new entrants to pay old members. That is just the short way to describe it. Pyramid Schemes are essentially the same because they make the same promise of paying old members from funds generated by new members.

Interestingly, Ponzi Schemes may hide this fact about their operations. They may claim to generate the money by some other investments or by selling products while in actual fact they rob Peter to pay Paul.

Pyramid Schemes will usually present some elaborate diagrams describing how money will be generated to pay old members (called upliners) from the fees paid by new members (called downlines). Sometimes they are called Referral Businesses or Referral Programs, and sometimes they also sell products.

However, if a company generates most of its revenue from registering new members rather than from selling products, then it is most likely a Pyramid Scheme. It will one day reach saturation point, (when it can no longer find new members) and it will collapse.

Why Are Ponzi Schemes Attractive To The Poor?

In this context, “poor” means people of little means. However, poverty has been defined as a lack of the ability or knowledge of how to meet ones needs.  Knowledge and ability are therefore necessary to make wealth, which is the opposite of poverty. It is exactly the lack of these things that pushes people into poor investment choices.

Poor People Lack Knowledge

Poor people lack the knowledge of what a good investment should look like. Ponzi Schemes are therefore attractive because they seem to offer people a way to grow their capital. Furthermore, Ponzi Schemes are easy to get involved in; they do not often require plenty of documentation, and they are often marketed to people directly in their homes or places of business.

Poor people no doubt have the idea that money invested can generate more money; but this half knowledge is more dangerous than non. They are easily convinced by unconfirmed tales of people who have invested in these questionable schemes, and then gone on to reap immense profits.

To capitalize on this lack of knowledge among the poor, Ponzi Schemes select a few people, and then sponsor them to foreign vacations and sight-seeing trips. All it takes is a few photographs in luxury hotels or other exotic locations, and then most people will sign up, and put their money. Another reason why poor people invest in pyramid schemes is because they are poor.

Poor People Are Poor

Poor people will invest in Ponzi schemes because they are poor and desperate. A hungry person is not a thinking person. A person who is desperate is more likely to fall victim to a pyramid scheme because he is already uncomfortable, and wants an urgent solution to his problem, even if it means risking what little money he has.

To understand why poor people love Ponzi schemes, picture a fish being tempted by bait. Clouded by hunger and desperation it goes ahead to bite; and so finds itself in hot water. Desperation beclouds men’ ability to think; troubled by the lack of good food, shelter and clothing, or any other such necessary things of life, they bite whatever bait is put before them, only to find that it worsens their situation.

Ponzi Schemes Are Very Dynamic

Ponzi Schemes are dynamic they change in form and appearance over time, and from place to place. Ponzi Schemes have evolved from the pen and paper schemes to more sophisticated online enterprises. Many now pretend to be crypto currency investments. They are basically profiting off the general lack of knowledge as to how crypto currency works.

Many people think that when they buy or invest in a crypto currency, they are then going to receive some form of dividends or payments over time. It just does not work like that.

Other people are interested in the nice sounding term “Network Marketing.” In the end they are required to sign people up, thus forming the network. People are told that they will receive commissions from the earnings made by those they bring into the system. they people they bring in will also need to bring in more people. soon, however, the scheme gets saturated, and new people stop coming in.

Network Marketing is attractive to poor people because it offers the chance of earning residual income. In reality however, it is just another name for pyramid scheme.

Referral Program is another name for the same thing. it hooks poor people in with the promise of earning money when new people sign up. In the end it always ends in tears.

Further Reading:

Finally

Ponzi Schemes are attractive to poor people because they do not know any better. Most poor people cannot afford resources to learn and improve their understanding of how money works. They are thus suckered in by promises of earning money continually for little effort.

Rather than waste what little resources one may have on Ponzi Schemes, Pyramid Schemes, or Referral Programs, it may be a better idea to learn more about money and investments; and how they work, so as to avail oneself to the many opportunities of saving money for the future, and for the benefit of future generations.

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