Money, Explained

Scrolling through social media,

there are lots of people offering secrets to make money quick.

If you're gonna make it, you need the right mindset.

If you're not thinking big, you're not getting big.

You can find the same kind of guys on every platform,

with the same kind of spiel.

I'm not selling you a fish, but I'm going to teach you how to fish,

to be an entrepreneur.

Marketing, networking,

enunciating your potential.

And those guys existed before the internet, too.

Mmm!

I was just like you, nine-to-five grind,

fluorescent lights sucking the life right out of you.

But I can promise you this…

there's nothing like the real thing.

And if you call in the next 15 minutes, I'll throw in a second copy for free.

For free!

Every generation had their own version of that guy.

What's there to think about?

There's no quicker road to mediocrity than procrastination.

This is your wake-up call, pal.

- - The words change,

but the pitch was the same.

Now, I would never take you for a maroon.

I know that you're smart.

And deep down, you know this isn't just some flim-flam.

But this is your golden opportunity.

And we kept falling for it.

History has taught us a lot, but for some reason this is an exception.

Before even Adam ate the apple,

financial scams have been making people millionaires.

So the real question isn't how to get rich quick.

The real question is…

- Cut! - Why?

Tail slate.

Why do we keep falling for the same old act,

-and how can we avoid taking the bait? -

Here in 1919 is Charles Ponzi,

self-styled financial wizard.

You think you're being swindled, ask your lawyer to read those contracts.

Generally the motto I would always use is,

if it seems too good to be true, it probably is.

Sites that tell you that you have to pay money to get free money are a scam.

Bernie Madoff played on the vulnerability of everyone.

In 1821, a Scottish adventurer, General Gregor MacGregor,

sailed from the shores of Central America to the United Kingdom.

On his travels, he earned a royal title,

His Highness Gregor Cazique of Poyais.

And he arrived in London with an opportunity of a lifetime.

He discovered a new Promised Land, the country of Poyais.

A book, Sketch of the Mosquito Shore, Including the Territories of Poyais,

by an elusive captain, Thomas Strangeways,

described rivers lined with globules of pure gold,

and soil so rich it could yield three harvests a year.

Gregor MacGregor opened an office in London,

unfurled the Poyaisian flag,

and composed a ballad, "The Poyais Emigrant."

"Yon fairy land o' wealth and joy,

a home o' rest to bless the weary.

We'll a' gang to Poyais together."

People could come exchange pounds for Poyais dollars

and buy a piece of Poyais itself, as hundreds did.

In today's dollars, MacGregor raised over 20 million.

There was just one problem.

There was no Poyais.

That's Honduras.

That's Nicaragua.

Captain Strangeways was Gregor MacGregor.

He made the whole thing up.

It was one of the most outlandish scams in history,

but it was far from the first or the last.

Most human beings are terrible lie detectors.

Most of us think we're good lie detectors.

That's one reason why we're often fooled.

Evolutionarily speaking, we're actually wired to trust,

but it also means that we're susceptible to bad actors

who take advantage for their own personal, malicious aims.

You may have seen ads like these congratulating you

for winning a lottery.

You just need to pay taxes to claim the prize.

Or messages saying you've been approved for a loan.

And then right when you believe in all your heart

they about to put the money in your account,

that's when they then ask you to pay a certain fee

up front.

These are all advance fee scams.

You pay some money now in exchange for a lot of money later…

that never comes.

The most successful version of this scam dates back hundreds of years.

You get a letter from a very wealthy person

who needs a little money to escape a terrible situation,

and on the other side will give you a handsome reward.

These letters used to come from supposed prisoners,

but more recently they've come from Nigerian princes.

Another well-known scheme is one that involves a Nigerian prince.

It's been going on since even before the internet was a thing.

In Louisiana, a man under arrest tonight,

accused in the notorious "Nigerian prince" email scam.

We always joke about the Nigerian prince.

He doesn't exist!

He's not gonna give you money if you give him your bank account.

But advance fee scams like these

still manage to rake in millions of dollars a year.

Another popular scam that's just slightly more complicated

and way more fun to say…

Pump-and-dump schemes.

-Pump-and-dump. -Pump-and-dump.

Pump-and-dump scheme,

which has nothing to do with breastfeeding.

Instead, it works like this.

You persuade people to invest in something that's worthless,

pumping up its price, and then you dump your stock when it's at its peak.

This happens a lot today with cryptocurrency.

A schemer will send out a pump signal in a messaging app like Telegram.

Insiders rush to buy the coin, boosting the price.

Then other people, who think it must be a hot stock, rush in and buy it too.

And then the insiders sell off.

The entire cycle takes minutes.

And then there's a slower-burn investment scam

that can survive for decades.

It's named after Charles Ponzi,

an Italian immigrant who, back in the 1920s,

made a fantastic promise.

He'd double your money in 90 days, guaranteed.

But in reality,

he was simply paying early investors with money from new investors.

That's how all Ponzi schemes work.

It's borrowing from Peter to pay Paul,

and then borrowing from Paul to pay Jane, and so on and so on.

The only hitch is,

if enough of the investors ask for their money back at once,

the whole thing collapses.

Which is what happened in 2008,

when this type of scheme infamously came back into the spotlight.

For decades, Bernie Madoff was able to launder

billions of dollars in Ponzi proceeds,

essentially through a single set of accounts

at JPMorgan.

Apparently he was purporting to be getting 10, 15% returns on their money,

when in fact, he'd lost all of it,

and pretending to pay off the old people with new people's money.

A reason people trusted him so much

was because he was such a pillar of the American Jewish community,

and people thought, "Good old Bernie, he's above suspicion."

Turned out he's a total crook.

Ponzi schemes are known as affiliation scams,

because they tend to victimize people who have some--

something in common, such as religion or ethnic identity, with the scammer.

Ponzi schemes often get confused with pyramid schemes,

but they're different.

Here, you don't borrow from Peter to pay Paul.

You pay Peter if he convinces Paul to join your scheme,

and then if Paul brings in Jane, both Peter and Paul get a cut,

and so on and so on.

Multi-level marketing companies also rely on recruitment.

You may have seen friends online trying to sell you products

and recruit you to also sell those products.

But MLMs are legitimate businesses,

as long as most of the money comes from outside customers buying their products.

Pyramid schemes aren't.

Their products are pretty worthless,

so most of the money comes from recruitment.

And when the scheme runs out of new people to recruit,

then the whole thing collapses.

And then there's a final category:

coaching schemes.

They're similar to advance fee schemes,

but instead of paying money for the promise of money,

you pay money for knowledge that they promise will make you money.

Wouldn't you like to learn how to make a fortune in real estate

without needing any money?

Except the promises are false.

The money-making programs largely don't deliver,

and you're often lured into paying for progressively more expensive classes,

because they're great salesmen who use every tactic in the book,

starting with that fantastic promise.

I assure you, it's very real, and actually pretty easy to do

if you just follow my system step by step.

They have compelling rags-to-riches stories.

Jeff, seeing how your life is now,

it's hard to believe that before you discovered your shortcuts,

you were dead broke, living in your sister-in-law's basement.

Testimonials from supposedly happy customers.

Using just one of Jeff Paul's shortcuts,

I'm currently making over $250,000 a year.

And they create a sense of urgency.

You have to get moving, because I'm only looking for a few people,

a few motivated people, hard-working people in your area.

All of these kinds of schemes rely on similar tactics,

and they all tend to thrive at certain moments:

moments of change.

At the time Gregor MacGregor made up Poyais,

London was in the grips of a great speculative flurry.

People were getting rich on all kinds of new hot things,

including countries.

All these nations just declared independence.

It wasn't a stretch to think Poyais may be among them.

So you have con artists throughout history

who come up during wars or pandemics,