As to pyramid schemes:
Many pyramids are more sophisticated than the simple model. These recognize that recruiting a large number of others into a scheme can be difficult so a seemingly simpler model is used. In this model each person must recruit two others, but the ease of achieving this is offset because the depth required to recoup any money also increases. The scheme requires a person to recruit two others, who must each recruit two others, who must each recruit two others.
The "8-ball" model contains a total of 15 members. Note that unlike in the picture, the triangular setup in the cue game of eight-ball corresponds to an arithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme in the picture in contrast is a geometric progression 1 + 2 + 4 + 8 = 15.
Prior instances of this scam have been called the "Airplane Game" and the four tiers labelled as "captain", "co-pilot", "crew", and "passenger" to denote a person's level. Such schemes may try to downplay their pyramid nature by referring to themselves as "gifting circles" with money being "gifted". Popular scams such as the "Women Empowering Women" do exactly this. Joiners may even be told that "gifting" is a way to skirt around tax laws.
Whichever euphemism is used, there are 15 total people in four tiers (1 + 2 + 4 + 8 ) in the scheme - the person at the top of this tree is the "captain", the two below are "co-pilots", the four below are "crew" and the bottom eight joiners are the "passengers". The eight passengers must each pay (or "gift") a sum (e.g. $1000) to join the scheme. This sum (e.g. $8000) goes to the captain who leaves, with everyone remaining moving up one tier. There are now two new captains so the group splits in two with each group requiring eight new passengers. A person who joins the scheme as a passenger will not see a return until they exit the scheme as a captain. This requires that 14 others have been persuaded to join underneath them. Therefore, the bottom 3 tiers of the pyramid always lose their money when the scheme finally collapses.
Wow, very interesting, too2, to say the least
Consider a pyramid consisting of tiers with 1, 2, 4, 8, 16, 32, and 64 members.
No matter how large the model becomes before collapse, approximately 88% of all people will lose.
If the scheme collapses at this point, only those in the 1, 2, 4, and 8 got out with a return. The remainder in the 16, 32, and 64 tier lose everything. 112 out of the total 127 members or 88% lost all of their money. During a wave of pyramid activity, a surge frequently develops once a significant fraction of people know someone personally who exited with a $8000 payout for example. This spurs others to seek to get in on one of the many pyramids before the wave collapses. The figures also hide the fact that the confidence trickster would make the lion's share of the money. They would do this by filling in the first 3 tiers (with 1, 2, and 4 people) with phoney names, ensuring they get the first 7 payouts, at 8 times the buy-in sum, without paying a single penny themselves. So if the buy-in were $1000, they would receive $56,000, paid for by the first 56 investors. They would continue to buy in underneath the real investors, and promote and prolong the scheme for as long as possible in order to allow them to skim even more from it before the collapse.
Other cons may also be effective. For example, rather than using fake names, a group of 7 people may agree to form the top 3 layers of a pyramid without investing any money. They then work to recruit 8 paying passengers, and pretend to follow the pyramid payout rules, but in reality split any money received. Ironically, though they are being conned, the 8 paying passengers are not really getting anything less for their money than if they were buying into a 'legitimate' pyramid which had split off from a parent pyramid. They truly are now in a valid pyramid, and have the same opportunity to earn a windfall if they can successfully recruit enough new members and reach captain. This highlights the fact that by 'buying' in to a pyramid, passengers are not really obtaining anything of value they couldn't create themselves other than a vague sense of "legitimacy" or history of the pyramid, which may make it marginally easier to sell passenger seats below them.
Pyramidal schemes are cult-like environments, with those on the top being those who do nothing but lie and win, and the further down you go the more suckers, who lose everything, you find ...
What I wanted to point out, though, is that the hierarchical structure that the current social order entails can well be likened to a pyramidal scheme.
So basically, when members receive no more benefits (there's no more money to be distributed to the people down the line) the brainwashing kind of thing stops working and the whole pyramidal scheme falls?
Or, to draw another parallel, when oil reserves of the Persian Gulf are denied access to the Western countries, and going to war proves too damn costly in the long run - our economies are bound to collapse, since they are relying on stealing from other countries' resources to keep the standard of living artificially high - all in accordance with the social Darwinism kind of philosophy, that for every a winner there is a loser?
Will you walk me to your car, could you expand a bit on this other parallel you draw?