The divine right of kings

The majestic ancient pyramids were built to allow kings a divine voyage to the heavens, to make their transition to the afterlife as smooth as possible.

It wasn’t only in ancient Egypt that civilisations sought to build as close to the heavens they could – Giza’s Great Pyramid was superseded as the tallest man-made structure on earth by the final iteration of Lincoln cathedral in the early 1300s, while pyramids were also constructed from ancient Greece to Mesoamerica to China.

In ancient Egypt, the pharoahs spent years having huge pyramids constructed for their benefit, and were entombed in labyrinthine shrines with their treasures, destined to live forever in the afterlife.

Multi-level marketing schemes

Multi-level marketing (MLM) or ‘network marketing’ companies have been around for decades, with chequered and controversial histories often involving pyramid selling techniques.

While there may be an end product which is sold to consumers, much of the focus is typically on new entrant distributors generating commissions from finding new recruits to the MLM through word of mouth marketing, thus requiring that they become evangelists for the brand and its ability to generate easy money, lest the scheme collapse.

The MLM marketing messaging usually emphasises the lure of possible financial independence, while encouraging all participants to hold on in the hope that they might eventually received the promised outsized returns.

Unfortunately, studies have consistently found that 99% of participants in multi-level marketing companies generate either nil or insignificant profit, with only the founders and insiders creaming off the handsome rewards, leading many jurisdictions to outlaw (or at least heavily regulate) the practice.

The problem with pyramid or MLM schemes where little or no genuine value is being created is that ultimately the supply of new entrants is exhausted, or they are simply lured away by new schemes or the promises of riches elsewhere.

Don’t fall for it…

One might reasonably assume that scammers and fraudsters would experience most success during recessions, when their target investors are down on their luck or desperate.

However, in Don’t Fall For It – A History of Financial Scams, Ben Carlson found that greed fuels fraud, with the rampant speculation phase of the cycle clouding the vision of investors – enabling con artists to capitalise on blind confidence and a growing fear of missing out (FOMO), creating ever more schemes and vehicles to swipe their money.

Carlson notes that you only need to put your money into a scheme you don’t understand once to see it all vanish.

There’s nothing wrong with taking an educated risk with some of your net worth, but arguably there have never been more obvious frauds and scams hiding in plain sight than right now.

Remember you can’t see red flags when you’re wearing rose-tinted glasses, and FOMO is seldom a good reason to part with funds in haste.

Be careful out there!

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Recommended reading for those experiencing FOMO: The Psychology of Money, by Morgan Housel.