Speaking of MLM, its harmfulness is estimated to make many people hate it, but the topic we are going to talk about today is ten million times more terrifying than MLM. It is the biggest scam in the financial world-the Ponzi scheme.
What is a Ponzi scheme
Speaking of the Ponzi scheme, we have to mention an Italian, he is the inventor of the Ponzi scheme- Charles Ponzi .
Charles Ponzi immigrated to the United States since he was a child, and when he was young, he made a living by cheating, forging documents, and smuggling personal information. Later, after more than ten years of American-style wealth dreaming, he focused on the fastest profitable financial investment, and finally he thought An investment plan came out:
He declared to the citizens of Boston that he would get huge profits by buying European postal bills and selling them to the United States! As long as you invest $500, you can get a return of more than 50% within 45 days. The compound interest rate of continuous follow-up is ridiculously high!
Under Charles Ponzi’s rhetoric, a total of 40,000 people listened to Ponzi’s investment plan and invested a total of 15 million U.S. dollars. This money made Ponzi rich overnight. He also lived in 20 rooms. In his villa, he bought more than 100 sets of expensive suits, accompanied by special leather shoes, and possessed dozens of gold-encrusted walking sticks. He also bought countless expensive jewelry for his wife, and even his pipe was inlaid with diamonds.
In fact, he has not even bought a European stamp.
So why do so many people believe in Pound's investment scam?
In fact, the principle is very simple. It is to use the money of new investors to pay interest and short-term returns to old investors in order to create the illusion of making money and defraud more investment, which is commonly known as "removing the east wall to make up the west wall" and "empty ". Glove White Wolf" .
And this way of borrowing money to invest will one day go bankrupt. In 1920, Ponzi's "investment plan" was finally declared bankrupt, and he himself was sentenced to imprisonment and eventually died in Brazil.
Although Ponzi is dead, the "Ponzi scheme" has spread to the world like cancer, and we can often see him until today: the prosperous Ant Lishen and Quan Jian are all Ponzi. Representative routines of scams.
Principle of Ponzi scheme
In fact, the core idea of MLM is also a Ponzi scheme. We might as well calculate it from the perspective of data analysis and see what are the factors that support the Ponzi scheme .
If I were the initiator of a Ponzi scheme, the basic elements that constitute the circulation of capital flow are as follows:
Initial number of investors: that is, the number of the first batch of investors, assuming 100;
Average amount of investment: the average amount of money each person invests in me, assuming that each person invests 50,000 yuan;
Total investment: the total investment amount collected by the first batch of investors, assuming a total of 100*5=5 million;
Monthly interest rate: the profit rate promised to investors every month, more than 10% is the profit level of abnormal investment;
Monthly withdrawal rate: the principal amount that investors can withdraw each month, assuming that only 40% of the principal can be withdrawn each month;
Monthly renewal rate: The ratio of the amount of investment I renew each month. The setting here is relatively small, as long as 20%;
Monthly platform operating fee: the amount for my own consumption each month, this assumption is fixed that I spend 500,000 per month;
In this way, we can build a simple model and set up initial data. Assuming that the above factors are stable, we can calculate how long the Ponzi scheme will eventually collapse!
It can be seen that under hypothetical conditions, I will be completely bankrupt in the fourth month, and in these four months I have collected a total of 2 million for myself to spend!
In order to clarify the factors affecting the Ponzi scheme, we changed some of the conditions and looked at the results:
1. Change the pull rate
If we increase the proportion of new funds each month, we can see that when the new rate reaches 60%, we will not lose money every month, and my "Ponzi scheme" will be unbeaten. place!
This is why MLM will attract people everywhere, because only by continuously attracting more investment can one's basic capital be able to maintain profitability, and the more basic capital, the more capital investment is needed, and it will fall into a vicious circle;
However, in fact, it is impossible for the change of the new rate to remain in a high proportion, because the Ponzi scheme will not create value, so the real rate of new refresh will definitely show the following changes:
2. Change the withdrawal rate
If we increase the proportion of funds withdrawn every month, that is, investors can raise more money every month, let's see how long I will go bankrupt:
It can be seen that the higher the withdrawal rate, the faster I will go bankrupt. If investors take away the principal and interest every month, then I will go bankrupt that month. Therefore, as long as the withdrawal rate is limited to a certain range, By letting the new funds pulled out each month be greater than the funds withdrawn, the profit of the total assets can be guaranteed, so that my "Ponzi scheme" will never go bankrupt.
3. Change the interest rate
The interest rate is the rate of return that I promise to investors, that is, in addition to the principal, the amount of interest paid to investors every month. What happens if the interest rate changes?
It can be seen that it is similar to the withdrawal rate. The higher the interest rate, the faster I will go bankrupt. Under normal circumstances, MLM claims that the profit rate can reach more than 30%. However, anyone who understands finance understands that the 30% profit rate is absolute. unusual!
4. Change platform operating fees
The operating fee of the platform is the funds for my own squandering. If I am an insatiable scammer and take one million from the platform every month, how long can my scam support?
Two months will go bankrupt, and if I spend only 100,000 a month, what will happen?
It can be seen that my scam is sufficient for 7 months!
It shows that the operating cost of the platform has a significant impact on the platform. If a team of scammers is extravagant and prosperous, spends money like gold and does not control costs, this will speed up the crash.
to sum up
MLM is terrible, but even more terrifying is the "Ponzi scheme" that can be seen everywhere around us. In fact, the way to distinguish Ponzi scheme is very simple: Don't easily believe in investment plans with high returns! There will be no traps in the sky, only traps will fall!