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chain letter

In the money chain letter, a recruiter sends new recruits a letter with a list of names on it, including the recruiter's name at the bottom of the list. The recruits are asked to send money to the name at the top, delete that name and add his own name to the bottom, and recruit 5 or 10 people to do the same by sending them the letter with your name at the bottom. Money is made solely by getting new recruits to join the chain, adding their names to the list and recruiting others to do the same.

In theory, eventually each recruit's name will be at the top of millions of lists and receive millions of dollars. In practice, most people will receive nothing. Anyone can break the chain, thus depriving all those on the list of any possible "earnings." But, even if no one broke the chain, 95% of those who sent money out will get nothing in return.

If pyramid schemes are a bad investment, how about chain letters? The principle is basically the same, except that with chain letters, you don't have to deceive yourself as much as with pyramid schemes. You probably know up front that the scheme depends on duping friends into giving money to strangers in exchange for the promise of riches coming to you later on from other strangers.

See also Ponzi scheme.

further reading

Last updated 27-Oct-2015

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