Why do people invest in Ponzi schemes?

Ponzi schemes occasionally begin as legitimate businesses, but precedents have showed that they always fail leaving several persons at a loss. So why do people still invest in Ponzi schemes despite the precedents that people always lose? LifeXtra spoke to a cross section of Nigerians and this is what they have to say. Osuchukwu, Mark […]

Ponzi schemes occasionally begin as legitimate businesses, but precedents have showed that they always fail leaving several persons at a loss.

So why do people still invest in Ponzi schemes despite the precedents that people always lose? LifeXtra spoke to a cross section of Nigerians and this is what they have to say.

Osuchukwu, Mark Anthony 21, a writer, feels that people invest in Ponzi schemes because some take risks. “The same reason armed robbers know that it may be their last day on earth yet they go to steal.” He, however, stated that greed was the driving force and not illiteracy. “Illiteracy is not on the chart.  Greed is. Literacy doesn’t reduce greed, because there are wealthy men that were part of the thing,” Osuchukwu stated.

An engineer and entrepreneur, Adegbenro Adedayo stated that the first reason why anyone will invest in such schemes despite knowing the downsides was greed and the “get rich quick” mentality. He explained that people get carried away by the huge profit and forget about the associated risk.

Adegbenro explaining why people still fall even when they know the scheme is all about robbing Peter to pay Paul, said that “with the state of the economy, people find it so difficult to survive on their meager salary. The inflation rate is so high that feeding alone takes almost 90 percent of people’s salary so. The temptations are so high.”

Another reason Adedayo proffered is that high unemployment rate. He said “if you noticed betting shop/site operators are the destination for youth trying to make fast money before the Ponzi schemes like MMM, ultimate cycler and I-charity came in. If people are gainfully employed with good monthly pay, the greed to participate in Ponzi schemes will be greatly reduced. Also, very few among the participants are ignorant about how the scheme works, hence the reason they participate.”

Joan Oji, a youth mentor, said that “there’s a thin line between what Ponzi is and what is not.” She narrated that “Remember the Microfinance Banks and people’s lost savings? Recall the network marketing where if you bring new members your earnings grew proportionally?

If you ask me, poverty drives people to desperation; and nobody enjoys endless struggle to end poverty! And with politics enriching the minority and impoverishing the majority, Ponzi schemes become attractive.”

She, however, debunked the allegation that poverty is a driving force. “It’s sad that it has come to this. Mind you, the investors are not really poor; some smart persons are involved; including men of God.”

A lawyer, Ayoola Emmanuel, feels it’s a survival instinct to invest in Ponzi schemes. He stated that “survival is a basic human instinct. Everyone wants to stay afloat, by providing for themselves food, shelter, clothing and other secondary needs of life. For a lot of people, these basic needs are not negotiable regardless of prevailing circumstances which may include; failure in governance, loss of job, economic recession and so on.

So, the involvement of people in these schemes is not far-fetched, they want opportunities to invest little money and with little or no effort gain massive returns.”

Ayoola concludes that “A lot of those who invest in these schemes know it is bound to fail but the unbelievable returns and the pressure to satisfy the basics needs of life creates a need for them to participate and for others, it’s the greed to satisfy their wants that motivates. In all, the risk becomes worth taking for them.”