Contributing Author Dickson Igwe
There comes a time you’ve got to call a spade a spade. I mean, call something what it is! Now yours truly for the second time in 2011 was invited by a dear and wonderful friend to what one terms a ‘presentation.’ Ok, many of us getting an invitation of that sort know instinctively what it is about, but we swallow our reservations and sit down for an hour or so to a rendition of how such and such a product made Jack and Jill millionaires.
Snazzy videos of ‘beautiful people’ at that all important convention in Las Vegas or Atlantic City; two hundred thousand dollar Ferraris and Rolexes, and the digital rolodex on the latest version of I phone and blackberry to boot. Deep down you know this looks too good to be true, but being a sociable animal, you don’t want to spoil the party!
At these presentations, sharp shooters point out the ways and means to that first and all engrossing million dollars and second home in Malibu with golden signpost, with a leased jet at an airfield nearby thrown in. It all sounds good until you get into the mechanics of the deal: the metrics. Now one only has to visit Wikipedia to get the ‘low down’ on what this type of business is. And the proponents hate it when you realize it is simply another ‘pyramid scheme.’
Wikipedia puts it this way, at the most extreme, ‘’ a successful pyramid scheme combines a fake yet seemingly credible business with a simple to understand yet sophisticated sounding money making formula which is used for profit. The idea is that a ‘con artist’ Mr. X makes only one payment. To start earning Mr. X has to recruit others like him who will make one payment each.’’ Ultimately, the person who starts, and his handful of followers at the top of the scheme are the only real winners in the game!
And yes, this is the worst case scenario. But the Pyramid idea follows this trajectory. There is probably a sliding scale of legitimacy from the totally illegitimate with just a fantasy product to the fully legitimate with a host of tangible products that are available at the presentation. But ultimately it remains a game of pawns, a losing formula for most.
And for Virgin Islanders who may have difficulty accessing a United States network for not possessing US citizenship it becomes a game of obstacles. The local ‘pawn’ having to depend on a local postal service, and then US immigration and customs scrutiny, before accessing various and more powerful pieces on the pyramid chess board, and ultimately the King and Queen at the top of the Pyramid. The Native Virgin Islander usually enters the game with one leg and his hands tied behind his back.
Wikipedia describes how Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the business expands. Wikipedia asserts that most such scams are well equipped with fake referrals, testimonials and information. Ultimately, this is simply a money from thin air ‘voodoo’ type economics: an Aladdin lamp epiphany!
The flaw is that there is no end benefit. The money travels up the chain. Only the originator, sometimes called the pharaoh, and a very few at the top levels make significant amounts of money. The amounts dwindle steeply down the pyramid slopes. Individuals at the bottom of the pyramid, those who subscribed to the plan, but were not able to recruit any followers themselves end up with a deficit.’’ As usual, the last in is usually the mug with egg on the face! Those Ferraris, beach homes, and private jets are a gift from the gullible folk at the bottom of the pyramid to the con artists at the top!
This is a game of pawns, not real chess for most. It is a game of chess for the King and Queen, yes, and other players at the top of the Pyramid, but for those at the bottom it is skiing down a dangerous precipice in the black of night. And usually, when you get that invite, it is at the level of pawn, and most remain pawns throughout their involvement with the scheme, usually dropping out after recognizing the futility of the scheme and losing a few hundred dollars in the bargain. Strangely, they jump at the next invitation to a similar merry go round: I wonder why!
Someone at the top of the chain is already King and Queen, with various lieutenants as the chain descends, till the level of pawn. The pawn is the individual who makes the game possible and is essentially the victim: the fall guy! He or she must recruit more pawns to further enrich and fatten the King and Queen at the top: a pawns game indeed!
The pyramid and similar schemes are the simple offshoot of a perverse Western cultural subset: a ‘dodgy’ type economics based upon greed, easy credit, ostentation and consumption. But a rendition built on a foundation of sand. This is a love song to the casino, and an economics of the ‘Ferris wheel,’ but ultimately, it is a false commerce. Its counterparts are those schemes on Wall Street and the City of London, much higher up on the scale in terms of complexity: from arbitrage to derivatives, subprime mortgages, hedging, and the such, where ‘Smart Alecs’ concoct every type of devious scheme and device to bleed the consumer of his hard earned cash. Fall for it at your peril!
The wise individual should look at the Chinese and Asian economic model, where people produce more than they consume, cherishing a culture of thrift and hard work, while churning out tangible products demanded by a hungry Western consumer. The earnings from these products, an export driven paradigm, inevitably end up in the homes of the Westerner: men and women who over two decades have been fooled by conspicuous consumption and easy access to credit, and who are today being crushed by debt; this sad state of affairs is a creation of irresponsible banks who borrowed excessively from those selfsame Asians and Chinese.
This fueled a credit crunch and housing bubble that went South between 2007 and 2009, taking the entire Western banking system with it. Today, a highly leveraged European banking system is still living with the consequences. The global economy remains under threat from a debt load in the Western marketplace the height and mass of a vast mountain range.
Asian thrift is a lesson we all in these Virgin Antilles could learn and benefit from. We must get back to the basics: producing much more of what we consume, waiting to purchase a big ticket item only after we have the money safely saved, and learning how to live within our means. As the old people say: ‘’ if you cannot afford something, leave it alone!
One thing we are blessed with in these Virgin Islands is local land ownership. This is an inheritance that has created personal equity levels that are probably higher than most communities who do not possess a dynamic of the type. However, we must be careful with this most precious of assets, that it is not fritted away on foolish schemes, and a living ‘for the moment’ type economics, as clearly manifested by the Pyramid Scheme.
The agony of a losing hand! Is it worth the risk?
A brilliant article in US News of December 26, 2011, titled, ‘’ the big lie: Wall Street has destroyed the wonder that is America, ’’ Author and veteran Wall Street Insider, Michael Thomas, speaks of the phenomenon of ‘Easy Street:’ a culture of these modern times of ‘’kiss ass’’ and ‘’ lie through my teeth’’ that is ‘’anti-communitarian and morally opaque.’’
A questionable and increasingly bankrupt commercial culture of the Old Wild West, with the new cowboys driving Ferraris, wearing pin stripe suits, and carrying laptops and smart phones, instead of the normative Stetson, double barrel derringer, and prize mustang. This is the world of the early 1980s with Gordon Gecko as Poster Boy, and his ‘iffy’ deal making: a rendition of the con artist, smooth operator, and slimy polecat.
The Author speaks of a culture of immoral book keeping, elaborate corruption, and greed that has created a casino society with 1% owning the country’s wealth and essentially living off the remaining 99%. This is a false paradigm of greed and modern capitalism gone haywire, but a rendition of the gambler and the roulette wheel that is about to implode with dire consequences for the global economy, especially the Western economy.
Thomas writes of derivative malefactions, subprime mania, and rogue trading that is tantamount to ‘’ grubby schemes and scams.’’ The author sees the Occupy Wall Street Movement- OWS- as the tip of an iceberg that will see a global economic collapse shortly: let us all hope this never happens, it is ominous stuff indeed, what he writes about!
Consequently, caution these days is a virtue. And yours truly subscribes to the ‘Warren Buffet School of Investment.’ The world’s richest and greatest investor puts it very simply. ‘’Work hard, earn and save before spending, spend wisely, and live simply. He further advises the consumer to view thrift as virtue, and aim to own a personal business, but never putting all the eggs into one basket. Buffett further advises the individual to use credit only as a tool, and pay it off monthly, treat cash as king, and understand that ostentation is always a mugs game.’’ Buffett typically invests in everyday products that are necessities, and looks at the long term when investing.
Warren Buffet is a man worth over 30 billion dollars who lives in the same modest home he bought in the 1950s, he drives an equally modest car, and many of the executives working in his myriad businesses, including an aircraft manufacturer, get the shock of their lives as they depart their first class cabin on that all expenses paid business trip, only to realize later that their boss was all the while sitting happily in economy on the same plane.
Yes, ‘’the richest man is the man whose pleasures are cheapest,’’ so stated one Thomas Jefferson. And so true the proverb that ‘’a fool and his money are soon parted.’’ Money earned the hard and old fashioned way, by the sweat of your brow, lasts longer states a Hebrew Proverb. So, leave those fancy looking schemes alone!
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