You are cordially invited to a game that lets you earn money very easily. The game works like this:
- You pay $1000 to be recruited as a passenger to a plane.
- There are 8 passengers, managed by 4 crew members, who have 2 co-pilots above them, co-ordinated by a captain at the top.
- Everytime the “plane” is filled with 8 passengers, the captain retires and is paid out $8000.
- When the captain retires, the plane is split into two planes and everyone else is promoted one step higher (co-pilots each become a captain, crew become co-pilots, passengers become co-pilots).
- When each plane fills with 8 new patients, the captain of each plane gets paid out $8000 and retires.
This seems like a very easy way to earn money. Where else could you invest money and guarantee a 700% return, only needing to recruit 7 new people into the game?
The problem with the airplane game is that it is a classic example of a pyramid scheme. At first glance, it seems that the payout of $8000 is guaranteed because it seems that the promotions will keep coming.
But if you look at the mathematics, 8 people need to participate before the first player wins. 16 people have to participate for the second player to win. 80 people have to participate for the tenth person to win. If you are the one-thousandth person to join the game, you need a total number of 8000 people to be playing the game before you are paid out. At the end of the game, 87.5% of people playing will have lost money because they will never be paid out.
This is how simple exponential growth can result in a very real fraud, resulting in thousands of people losing their hard-earned money.