The Great Pyramid Con of 1979. My first lesson in modern economics

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It was noon on a Friday. I was a young man and had just begun a construction apprenticeship. The crew I was with were out on a work site having lunch when a young journeyman came in and joined us. He was young and single and making a solid journeyman wage. He drove a company truck and the world was his oyster.

As he approached the stack of sheetrock on which we were sitting he appeared as if he was about to explode out of his skin.

"You guys will not believe what I did last night".
"Tell us Max, blond or brunette? "
"No, nothing like that. I went to a money party."

"A what," sez we?

"A money party. There were all these people and there was all this money flying around."

"What do you mean Max" sez we?

" Well first off it was just crazy. There were all these people with all this money. My brother invited me and another guy. Anybody who is there for the first time has to pay $1,000 to get in the door and sign a numbered list. My brother went to one the night before so he got in for free."

 The host collects all the money. When he gets $32,000 he takes it over to one guy and and counts it out in front of everybody, "

At this point, Max pantomimes slapping thousand dollar bills onto the Sheetrock.    1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16 thousand dollars.    

"Then he takes out a list of people who had gotten in for free because this was their second party, like my brother, and hands $1000 apiece to the 16 of them.

"That's crazy Max," sez we.

"No, no," sez Max, "listen. There were like 150 people there. The host's wife had been collecting when he was handing out the first $32,000 and she gave that $32,000 more to him. He took it and went to another man and counted out1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16 thousand dollars. (again he pantomimes)
Then he took the list and gave $1000 to the top 16 first timers on the list. That's when I got my grand back. Now I'm on the list to reach the top and collect the $16,000 and it didn't cost me a cent."

The list it turns out had five lines.

 The first or bottom line of first timers has 16 places on it. 
The second line has 8 places on it.
The third line has 4 places on it.
The fourth line has two places on it and
The fifth and top line has only one place. The $16,000 place.

Max  had already moved from the first line to the second line when he got his money back because 32 people had walked in the door after him.

"People on the second row get nothing but when the guy on top gets his $16,000, but they move up to the third row.

People on the third and second row get nothing but they move up lines as the top guys get the $16,000 and move off the list.

All you have to do is keep going to these money parties and bring two friends with $1,000. That's all. One guys money goes to you to pay you back your $1,000 and the other $1,000 goes to the guy on the top. There's a party tonight. Who wants to come"

Well I did some quick math in my head and said not me. I was making just above minimum wage with three children and I could add two plus two. It was clear to me that when you reached the fourth row of just two people, the pyramid split into two and fundamentally had to double in size for each payout.

That night we were having dinner with a friend and his wife. He was a journeyman and making good money. Through our dinner and a game of ma Jong, he received no less then 10 phone calls from other friends asking if he wanted to go to a "party" that night or the next.
We looked at each other and smiled. "Somebody's gonna pay and lose real soon". 

Well, Monday came and I was working in the shop for this construction company. The buzz about the money parties was all over the place especially by the the owner who had risen to the third line and kept asking me if I was sure I didn't want to come to one. 

Among the other people in the company, many had gone to one or maybe two parties that weekend. Some had gotten their $1,000 back and some hadn't. Those who hadn't were sure they would get it back the following weekend at the next round of parties. All they had to do was bring two friends with money. Just two.

The following weekend more parties were attended and more money thrown about. On Sunday, I watched football with two friends and between plays we discussed the money parties. My friends had been invited to a party that coming Wednesday and were all for scraping together a grand apiece and going to the party that Wednesday night. They wanted me to come along if I could bring a thousand dollars.

I explained the math over and over to them and thought they understood. Showed them a diagram of the pyramid and tried to help them see the dynamics of the con. They said they did.

Well Wednesday afternoon came and one friend, Joe, came back to see me. I explained it to him once more and told him not to go, that surely this thing had been going on for over a week and would soon break apart. He went anyway.

Joe came back the next night and told me how wrong I had been. The pyramid had only three lines. One had 16, one had 8 and the third had two the top two people didn't get $16,000 but only $8,000 apiece.

Danny put in a grand and Joe put in a grand and between them they put together another thousand to get Danny's mother in.They hadn't gotten their money back but surely knew they would at the next party which was scheduled for that Sunday. They  wanted me to get a few more friends and come to the next party.

I looked at the diagram of their party and could clearly see that the bigger pyramid had disintegrated and split in two so those who had gotten near the top could at least get something out of it. To me, this thing was just about over.

I looked at them and tried to explain to them, but they wouldn't hear me. So I said that I would come with them on Sunday.

"Where is the next party"I asked?
"It's at my house said" Joe.

Sunday night. Joe's house. Nobody there but the three of us minus their $3,000.

Post script.

Two weeks later the owner of the company I worked for stuck his head into the shop and asked me if I wanted to go to a money party at his house that night.

  I politely said I had other things to do as he disappointedly turned and walked away. 

Wow. Unbelievable. It's easy to say that people were really stupid, but I think this was a new idea to many people then. I remember similar things being floated around as good ideas when I was a small kid, in the early-mid 1980s. I saw snail-mail letters and faxes for new shoes pyramids, recipes pyramids, money pyramids... My grandmother has always been a little naive and she participated in one, while my grandfather tried to explain to her why it wouldn't work. She didn't listen (though it was a lot less than $1k she lost).

Someday people will forget about Bernie Madoff and a similar idea will get floated around by email (or whatever we're using by then) and people will fall for it all over again....

reply to post by TerryMcGuire


Nice story with a lesson.

I wish I could be that succinct.

reply to post by TDawgRex


Tdawg. Thanks. But you know I've read several of your threads and found them both thoughtful and concise. It's nice to have you around after your service. And thank you for that also.

reply to post by TerryMcGuire


Great post Terry. I love reading about old school cons I found this one very interesting. You should check out some books about or by Joseph “Yellow Kid” Weil he was an early 20th century con man but very endearing and his descriptions of how he did it, the kinds of confidence tricks he used really make you take a shine to him.

SnF.

reply to post by Imhotepsol

Thanks for the appreciation Imhot. The whole thing took about two weeks. Having the perspective to sidestep the meme as it flew through our area allowed me opportunity to act the student and observe. The whole thing served me as a template in beginning to understand something for nothing thinking.

"Hustlers and Con Men" is a very good book I found several years ago. It runs the gamut of cons chronologically as well as small to large international cons. Easy and fun reading it offers a light view of our human gullibilities.

reply to post by TerryMcGuire


Ah you're a smart cookie Terry it'd take more than a flim flam artist to get one over on you I've seen you beat off worse here.

I'm gonna take a look for a copy of that book now, I haven't read much offline in ages and I could use a good light hearted read.

reply to post by Imhotepsol

When I was 18 I got taken by a carnival barker, the one where most everyone else wins as a set up for the sucker. That was so embarrassing. In my early twenties I took a low level sales and merchandising position which utilized the same practices of playing on peoples weaknesses to get them to buy stuff. I was very good at it as I understood how to manipulate people but the embarrassment from the carnival incident kept nagging at me like Jacob Marley and I quit before my personal integrity was completely compromised. I guess these and other experiences helped my immunity to that pyramid meme.

reply to post by TerryMcGuire


I walked away from a very well paid job in Oracle as a lead tech sales man and went to a monastery for that reason. The whole profession just made me feel like I needed to take a shower every 5 minutes. I don't think I'd ever go back into it again.