The Gen Z Pyramid Scheme Sweeping Instagram | Hacker News Reader

The Gen Z Pyramid Scheme Sweeping Instagram

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There are a lot of judgment posts in the comments here. Let me ask a few questions of the HN crowd:

* When were these kids educated about pyramid schemes and other scams? When were they taught the patterns to look for?

* Who is responsible for teaching them? Most of you will say "Parents", but are they equipped to understand and teach?

The old cliche is Those who don't know history are doomed to repeat it but who is responsible for teaching that history?

And it's not just this scam. It's all over Cryptotokens right now. It's in our free-to-play games. It's MLM. It's the house-as-an-investment because "housing will never go down". It's thinking you're "Smart Money" so long as you aren't the bagholder. And for the first few entrants, these tactics really do work.

This pattern of economic exploitation is old. Instead lets educate as many people we know about the warning signs. It's especially important to teach kids as they have no prior experience to guide them.

Everybody is stupid until we are properly taught, or burned. Maybe somebody will warn you against a "hot new thing" that's hypnotized your attention.

Maybe games like this are the education. Part of me wants to see Instagram/venmo allow these to continue to happen because it's better for these kids to lose $150 now than $10,000 later.

That would only work if everybody experienced the $150 expense. However the winners never feel this pain. Additionally not everybody is exposed to the Venmo scam. How many of us are hearing about it for the first time here? It's a first for me to be sure.

Instead think about vaccinations: It's supposed to be distributed universally and it does not harm the individual receiving the inoculation. This is what you want. We can design tools for parents and teachers that have the same educational impact without the side-effect of harm.

>* When were these kids educated about pyramid schemes and other scams? When were they taught the patterns to look for?

>* Who is responsible for teaching them? Most of you will say "Parents", but are they equipped to understand and teach?

learning by getting you own bruises seems to be the learning way of choice of human species. Beginning of 199x pyramids of all sorts and at all scales swept across former USSR - pretty much everybody was a "kid" back then when it came to anything market/capitalism related, and thus they had to pay for their "practice based economic education" out of their own pocket :

https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company)

"МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time, in the 1990s."

I expect that some ICO will soon finally beat the MMM record :).

MMM is alive and well in Africa, unfortunately, ICOs make me feel like Chicken Little.

> pretty much everybody was a "kid" back then

The Universality of the blindness is what bothers me the most. What am I blind to? When does Caveat Emptor bleed into paranoia? My hope is to inspire more people to speak up to others so somebody can warn a future me away from a mistake.

https://en.wikipedia.org/wiki/MMM_Global

I knew a few people in my high school engaged in multi-level marketing schemes. One of them tried to sit me down and sell me on joining, and I flipped it into trying to explain to them why it was a bad idea. It was a new concept to me at the time!

The best part? They're legal in the US: https://en.wikipedia.org/wiki/Multi-level_marketing#Legality...

It seems like they're putting THIS IS A PYRAMID SCHEME on top and people are still buying into it.

(Admittedly, pyramid schemes usually do work if you're the one starting them and you don't get caught. It's also nice to see someone starting a pyramid scheme that doesn't involve blockchains for a change :) )

One thing that makes me skeptical about this post is talking about "sweeping instagram" in the title and "hype" in the post, but the best evidence for how wide it's spread they can muster is

> The trend has been picking up speed over the last few weeks. My colleague, Danielle and I, could only find examples on Instagram stories but it’s entirely possible that it’s spreading on Snapchat too and we just don’t have the right friends.

Like other supposed worldwide youth crazes, until I see better numbers it could be that something like 100 (ok, 128) people in the whole world have done this and it's not half as big as it's claimed to be.

The problem is that pyramid schemes need to be stopped ASAP to limit the damage they do.

There isnt much damage. No money is lost, it just moves. Admittedly into fewer hands. The damage is mostly capped at $150 or so, I would imagine.

Normally in a ponzi there is a pretense of a business that you are funding and so you can really empathize with those who were fooled, but no one is being fooled here. They know the risks. This is a ponzi game, not a ponzi. It's social gambling.

> No money is lost, it just moves. Admittedly into fewer hands. The damage is mostly capped at $150 or so, I would imagine.

I mean, that describes literal robbery too.

Nah man, what if there are like 3 robbers. Then the money moved into more hands (I guess if some of the robbers only had like one hand though...). Pyramid schemes aren't a scam because it's fewer hands.

The linked tweet mentioning it[1] has 500+ retweets and 1k+ likes, so presumably a lot of people know about it.

[1]: https://twitter.com/itsdreebetch/status/953111010092621824

IMO this is a good opportunity for them to learn how a scam works before they go out in the real world with real money and really get taken for a ride.

Everyone falls for a scam at some point in their life, better to learn early with minimal loss of money.

$150 is real money.

It represents what, two days of work at minimum wage? Sounds like a cheap price to pay for falling for a scam. You could lose a lot more in this world. A lot more.

Actually, factoring in payroll taxes, it’s closer to 4 8-hour shifts on minimum wage. A more expensive price to pay for falling for a scam, but a very cheap lesson in the long run.

Federal minimum wage: $7.25

$7.25 * 16 hours = $116 gross

Annually: $15,080

Percentage of annual salary ($150): 1%

$150 is not “a cheap price to pay” if you are below the poverty line.

There are few things that appear more crass than this. Have you ever been poor?

When I was poor I couldn’t afford to go dumping 2 or 4 days worth of work into weird schemes.

Once I did have more money though, I did get swindled, and for probably 10x as much. But I learned.

Maybe the people taking part in these pyramids aren’t as poor as you think, but probably still poor by some standard.

Sadly there is not very much overlap between that kind of logic and poverty. Remember all the people that blew their FEMA debit cards on strippers and shoes?

$150 was a huge amount of money when I was poor. It represented several-days to a week's worth of earnings. You've got to be doing alright for yourself for $150 to only be a day or two's worth of pay, after taxes and expenses.

In the bigger context of how much money people lose in more sophisticated schemes, $150 is really cheap for such an important life lesson to learn.

When I was a kid, people were doing the exact same thing, only with the U.S. mail, dollar bills, and much bigger pyramids. I'm kind of surprised it took this long for me to hear of a social-media/online-payment accelerated version.

There was a popular one few years back called "money flipping". Mostly on Instagram and Facebook. Not sure if it was a pyramid format but definitely a get-rich-quick scam.

It seems to me that pyramid schemes like this are orthogonal to many other types of schemes, particularly in politics and entertainment, where the buy is sometimes primarily time but the end result is the same, a waste of resources which was supposed to result in happiness or achievement, that only benefited the charismatic SOB's at the top.

It's interesting how prone the major social networks seem to be to outright scams. You can find plenty of cult leaders and fake cancer treatments on YouTube, Holocaust denial material on Reddit, etc.

Of course those companies have every right to keep that material up, but it's strange how those scams are tolerated when other stuff is taken down. The pure scale of it all probably makes those scams more effective than they used to be as well. You don't gotta sell your miracle water from town to town anymore, you just make a YouTube video and send it out to a million people. Cryptocurrency scams really take advantage of this.

Not sure why those companies don't care about users getting taken advantage of, but they don't. Sometimes it feels like our economy is based on scams all the way down.

But maybe there is a positive side to this...

50 years ago this scam would have been targeted at middle aged people, in the prime of their scam detecting abilities.

These gen-z kids are getting hit with this stuff earlier, but will possibly spend more of their lives as savy, post scammed individuals. So the exposure leads to greater societal intelligence.

And because the scam is aimed at the young, the amount of money they are losing is generally in the hundreds, not thousands of dollars, and has less of an effect on their overall quality of life or their retirements.

Not everyone who gets scammed learns. Many people become "rubes" again and again.

Actually, the funniest thing is that they have to strike a balance of people who understand how the system works enough to pay in and recruit others to do the same, but not enough to stay out. I found a craigslist ad that shows that difficulty: https://micronesia.craigslist.org/fns/d/turn-150-into-1200-o...

(Disclaimer: this is not my ad, and the only thing worse than the unconscionable stupidity of participating is the support you're giving to the the stupid person above you to keep being stupid.)

Trying to understand the "rich" part in "get rich quick" in this.

So let's assume I'm the one who started this thing - if I just start it I only get 1200$ out of it. How often do I have to "rejoin" the tree to cash in more? I'd have to pay 150$, so I can't randomly do that - or do I see that as an investment? Only thing that comes to my mind is keeping a whole "lineage" to myself with my fake accounts, so I only ever pay myself and cash in from the sidelines?

Maybe I'm just not smart enough to pull a pyramid scheme...

Anyone stupid enough to do this is getting off very cheap. If anything this will save them money in the long term as hopefully they'll only be swindled for the original $150.

$150 is probably not that cheap for a teenager; and I bet that a lot of them will re-"invest" into multiple stacks once they succeed once.

I think you're missing parent's bigger point. Nothing is big for almost any teenagers, because at the end of the day they don't have to pay rent or buy groceries or that type of thing. Plus, a good percentage of them are about to be saddled with 100-1000X that amount in debt. $150 is water under the bridge.

It's cheap compared to losing your life savings, but consider that being saddled with debt that's an investment(†) in college is different from losing $150 that you could spend on lunch tomorrow - in addition to the fact that they're likely not earning anywhere near as much as you and I are.

When I was in high school, losing $150 meant that I'm out of gas money for the next two weeks, which means that I'm riding the school bus every day at 6am, holding on to a paper bag with a sandwich I made the night before.

So...not a big deal?

Yes, my point was certainly that losing the ability to interact with your friends and peers in high school, as well as shifting your sleep schedule for half a month, is no big deal.

Can I have $150?

I wish I had three hands so I could triple face-palm.

Everything Old Is New Again

Reminds me of the transparent bitcoin ponzi scheme that was pretty popular for awhile before being shut down.

Why would you buy into pyramid from somebody else over starting your own and avoiding the risk?

Suckers keep being born.

How does the scam author profit? Seems like all the funds 4x150 = 1200 get distributed back into the network.

8x150. Presumably the originators were on multiple such pyramids. And if they're smart then they won't pay out $150 to anyone, just start a new one. Or maybe start themselves in the middle of one.

Or make 7 fake accounts, friend 8 gullible people with 4 of them, and rake in $9600.

> 4x150 = 1200

Meanwhile Gen Y are playing with cryptocoins. Gen X are sitting on stock. And everyone older is collecting a pension.

Owning stock in public corporations that generate immense value, profit, employment, etc. and hold vast income producing assets on which their valuation is based is not even slightly similar to a Ponzi, pyramid, or crypto scheme.

I 100% agree that they are different, but I think it's also worth pointing out that value-producing assets can still bubble away from a realistic valuation.

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