The Mathematics of ‘Ponzi’ schemes (Eg. Telex Free, Questnet, Nigiina, Golden-Neolife Products and other nuiscance schemes!

Every few years there is a new ponzi scheme in Uganda! The new ones are all disguised as direct marketing schemes selling some overpriced useless item!Once one bugs all of their friends and relatives and get them to sign up just to get you off their backs, one runs out of new people to recruit.And then the whole pack of cards comes tumbling down with lots of people burnt! Greed is beautiful for all that these people do is to exploit greed ie make money for doing nothing with the promise of an early retirement and sitting on easy street!

Many of us do these little Ponzis when we are organizing our weddings. The ‘wedding Ponzi’ does not make that much money because it is not pyramidal – the distribution is rectangular.

Many people are approached by often young energetic professionals who try to recruit them into various ‘money minting schemes’ in different formats, some involving the sale of products. The new schemes have now attached a product sale, so that they hide their real ‘Ponzi’ nature. They were named so after their modern inventor, an American conman called Ponzi. I have done for u the basic maths on which these ‘pyramid schemes’ operate.

A. The market

How many people can you have in a network (i.e. the maximum possible market?)
In Uganda, we are 34M
16M are adults
8M are non-dependent adults, earning a living
Only 10% live in municipalities where such schemes are known=800,000
Only 10% can afford to part with 700USD for a giffen good = 80,000
Only half of these are likely to be reached if Ponzi is vibrant = 40,000
The probability of convincing one person is 10%=4,000
Therefore, the maximum people you can get onto the market in Uganda is about 4000, given the assumptions above.

B. Payment hierarchies

Often monthly, the operators of these schemes send you a check. Payment is based on hierarchies – in order to earn anything, you have to recruit 2 people. If these people also bring others, you get regular checks.You convince them to buy a useless over-priced product. A product which normally costs 400USD is sold at 800USD by convincing and lying to the other person that they need the useless product and that they benefit in two ways: they get to use the product, but also join a money minting machine – provided they successfully recruit 2 people to buy the giffen. The essential philosophy behind these schemes is the ability for each human being to be a ‘little lier’, ‘a conman’, and a ‘good marketeer’, and the power of trust between our significant others.

The 400USD surplus from the bogus sale is spent as follows:
– 100USD is paid as taxes, so the business appears legit
– 100USD is spent on promoting the business and running the office
– 100USD is paid to the recruiter
– 100USD is paid to the recruiter of the recruiter and so on, so the top people keep mining money depending on their level in the hierarchy as follows:

If you recruit 2 pple (1+1)=200USD
If each of these recruits 2 (1+1)+(1+1)=400USD
If each of these recruits 2 u have =800USD
If each of these recruits 2 u have =1600USD
Next Hierarchy= 3200USD
Next Hierarchy= 6400USD
The money doubles at each hierarchy level

C. How the scheme collapses and what people earn at each level

So, if you have 4000 people in a market, how many hierarchies can you have? 1 (Initiator) recruits 2 people= 3; each of the 2 recruits 2 people etc; so you have:
L1=1 – cumulative total = 1 member
L2=2 – cumulative total = 3 members
L3=4 – cumulative total = 7
L4=8 – cumulative total = 15
L5=16 – cumulative total = 31
L6=32 – cumulative total = 63
L7=64 – cumulative total = 127
L8=128 – cumulative total = 255
L9=256 – cumulative total = 511
L10=512 – cumulative total = 1023
L11=1024 – cumulative total = 2047
L12=2048 – cumulative total = 4095 – Phew, by level 12, your hierarchy is finished! You cannot get new people because you have found all the possible 4000 that can join the scheme, so the pyramid scheme collapses!

Now, this is what you gain at the time the pyramid scheme collapses:
-2048 people at L12 get NOTHING (these are 50% of the members, who lose all their 400USD)
-1024 people at L11 get 200USD (which is less than their excess investment of 400USD in an overpriced product)
-512 get 400 USD (which just recovers their 400 and no profit at all)
-256 get 800USD (Double their 400, and through too much sweat because by this level, it is VERY hard to recruit someone, let alone 2
-128 get 1600USD
-64 get 3200 USD
-32 get 6400 USD
-16 get 128,000 USD
-8 get 256,000 USD
-4 get 512,000 USD
-2 (the originators) get 1,024,000USD
1 (the initiator/master planner) gets 2,048,000USD – all from 4100 miserable Ugandans

People from L1 to L2 are often part of the core team of initiators and promoters – they do a good job in creating propaganda materials, well packaged to hood-wink people. Problem is that when you are joining, you will never know at which level you are in relation to the remaining accessible market – then you start walking everywhere, exaggerating your benefits and stalking people. Trust me, I know what I’m talking about because I know a brother who failed to get a job as he was hooked on this for years.

1. Overall, 3,584 people (88% of the network) from L10-12 get nothing for their involvement, while 12% steal other people’s money from the sale of fake, overpriced veblem goods.
2. These schemes only benefit the founders and a small ring of people up to a certain level. You collect little by little to make others richer.It is true if you are in the first 1-6 layers of a Ponzi, you make money and the higher you are, the more money you make because the progression is exponential. But remember, for every profit you make, as many as 8 people lose their life-savings down the road – they can work hard to recruit others but down at the base of the pyramid – where the vast majority lie, people lose their valuable money.
3. For each level of recruits, they keep sending you a check, which motivates you to follow-up other people lower in your network, pressing them to recruit and fool people
4. To recruit one person IS SOOO HARD because people do not have money and the products you market are not attractive – some of them are associated with HIV patients – like fake machines that ionize water. Others are easily obtained at much lower prices like international calling cards; you will never find offers on laptops and i-pads – because sane people know how much these cost on the general market – they try to confuse you with these fake products because they want you to appear to be in an elite class.

And the tactics they use to invite you to their meetings is crazy. One member of one ponzi scheme once invited me to one of their meetings and the secret behind is not to discuss what to expect to the person you are inviting but rather leave the experts do all the conviencing, lest you distort the message. By the time they are done, you feel its something easy to do but when you try to recruit one person, after the initial fee of about 1.6 m aka…lifetime savings, you feel cheated.

So I went ahead and asked the person recruiting to pay the initial fee for me since the business was so profitable and easy, and the reply I got was:’ you need to invest using your dym so that you take ownership and be motivated to bring other people’ . I run for my dear life!!!!!!.As a rule, I don’t believe in ‘quick get rich ‘schemes. That saved me.

They organise their advertisement sessions in 5 star hotels and to attend to receive the lies, one need to pay some 8-10 USD which could have sustained one for at least a day!

In Islam, we have something called Riba – reaping where you did not sow – it is a heavy sin in Islam. Unfortunately in Christian circles, many Christians believe in ‘getting money by faith, without working for it’. This kind of mathematics is what also led to the collapse of the mortgage schemes in the US, contributing to the financial crisis of 2008 – you convince people that the hottest item on the market is a house. People get mortgages to buy houses at 400,000USD, when their real value is 150,000USD (but hyped by the market) .They pay the mortgage up to 200,000USD, then they fail to pay the balance – when the houses are resold by the bank to recover their loses, they are sold at 150,000 (Warren Buffet buys them all at less than half the original price).You who has paid 200,000 end up with nothing – real people lose ALL their life’s savings just because a batch of selfish people love money so much ‘that they don’t even bother to know where it comes from. And the bu-monies people on these schemes pose-about – 400USD on your account in a month – taken from a naive person is not money at all.If people thought just a little harder,and had the attitude to work just a little harder,genuine business opportunities abound.

By Afuwa Kasule

Without God, our week would be: Sinday, Mournday, Tearsday,Wasteday, Thirstday, Fightday & Shatterday. Remember seven days without God makes one WEAK!!”And if Allah touches you with harm, none can remove it but He, and if He touches you with good, then He is Able to do all things.” (6:17)



One Comment so far. Leave a comment below.
  1. Great work friend I too did a similar calculation at to explain my cousin about how MLM companies are bogus. While my mathematical numbers are general but your cunting breaks the numbers better than mine ….enjoyed reading this article

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