When I was about 9 years old, I got a letter in the mail from a mathematician who had figured out a money making secret. It was a wealth creating business that he had come across in an ancient manuscript. The letter described how the mathematician was skeptical at first but then he tried the model with family and friends and they all became wealthy. Even well respected and famous people were in on this secret and had participated.
Get Rich Quick: The Magic Formula
On the page in this letter was a list of 10 names and addresses. If I simply sent each name $5, I could add my name to the top of the list and erase the bottom name. Then I could pick 10 friends to send the updated list and letter to. Those 10 friends would each send me my $5 back so I would break even.
However, the real magic was that they would each in turn send the letter to 10 more people (100 in total). I could expect $500 to show up in my mailbox! When each of those people then sent it to 10 more I would receive hundreds of letters totaling $5,000!! My parents would need a bigger mailbox but at least I could afford it. Because next would come $50,000, $500,000 and then $5,000,000!!! My friends that I let in on this secret would get rich right along with me, a total WIN WIN!!!! In fact if you look at this Egyptian 3D triangle shaped model below you will see that in time I would join the likes of Rockefeller and the Monopoly top hat & monocle guy as a straight up billionaire:
My father warned me that this secret model may in fact be a scam but “what if it is not,” I pled. Don’t be jealous dad just because I could be the youngest billionaire in history.
Three Lessons From Get Rich Quick Schemes
If the description didn’t give it away, the illustration of the giant pyramid above may have let the cat out of the bag. This was a simple pyramid scheme aka a Ponzi scheme. After all, on the 11th round of this scheme, there would not be enough new people left on the planet to send these letters to. What was to keep me from erasing all of the names and replacing them with only my friends and relatives? Why not just add my name but not send anyone any cash? What if I then sent out 1,000 of these letters rather than just 10? These were all difficult questions to wrap my 9 year old brain around.
If this all sounds ridiculous it is…and it isn’t. There are valuable lessons beyond the obvious to learn from these scams.
#1 Greed Can Be Blinding
It seems obvious that things that are too good to be true usually aren’t.
- When someone tells you that you can get free money by clicking a button or sending a letter, I have found that the person making the money is usually the other guy.
- When you need to act now or lose it, waiting or walking away is almost always the best choice.
- When key information is not provided and a decision is requested, it may be wise to first get that information.
However, greed can be blinding. When someone wants to give up a dollar for fifty cents it is tempting to take it before they wise up. In my experience this is a good time to be extra diligent. Every transaction has two sides both looking to benefit. If the transaction seems ridiculously one sided, there is often a catch. For every person that wants to sell you real estate 20% below market value there may be 5 trying to unload their “as is” property with a dried up well, foundational issue, or a meth factory in the basement.
#2 Get Rich Quick Is Slower
We’ve all known someone who is always scheming. That friend who doesn’t have a career per se but always has some scheme or side hustle that is going to hit big. It is human nature to dream of fast easy riches. This is the allure of the casino and the lottery. However, if half of these schemes don’t pan out, it can erase all the gains even after lots of effort. I fully support an entrepreneurial spirit. However, if it becomes a repeated churn for “the next great idea,” then there is no time to build expertise. Compound interest applies to career and personal skill sets as well as to investing.
The Myth of Instant Success
The lesson here is not that everything is a scam and opportunities should be avoided. Rather the lesson is that get rich quick is largely a myth. Using the same real estate example above, I found that I needed to dig in the dirt before a money tree started to grow. This means putting in the time and the work to become knowledgable. Becoming an expert takes the quick out of get rich quick but it is totally worth it.
We often hear about the amazing fortunes made on a single deal by business magnates, real estate gurus, and venture capitalists. However, behind that single deal is usually a decade or more of experience and education. That person likely looked at hundreds of deals and only pursued a couple. The education and the diligence separated the gold from the garbage. In fact, all of that work starts to sound quite a bit like a full time job…
#3 The Greatest Pyramid Scheme Is Totally Legal
Remember that Pyramid above? What if instead of putting in all the work to scam someone, the creator put that work into building a professional reputation or building a simple and useful product or service. Victims are replaced by customers and clients. They love what you are doing and tell 10 people who then tell 10 more. Instead of ending up broke and/or in jail, you end up on the cover of Forbes. That kind of pyramid sounds pretty good to me 🙂
What Do you think of my lessons learned from trying to get rich quick? Have you learned any similar lessons in the past? Share your thoughts or experience in the comments below.
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