Idiots in Chains

I was a regular Usenet reader way back when David Rhodes (or whoever he really was) first burst onto the scene by spamming every newsgroup in creation to tell them how to MAKE.MONEY.FAST. Excellent, I thought; now everyone on the net will know about chain letters, and we will see no more of them.

To my amazement, it was only the beginning. And back then, before the year September never ended, I had some excuse for thinking people might learn from it. After all, to be on Usenet back then you had to jump through a few hoops, or make it into a university (yes, yes, I know).
I say all this because I got another chain letter in the (ordinary) post the other day. Funnily enough, it was an adapted version of David Rhodes' original work, with his name on it.

These days a meme seems to have taken hold that you should stick on a 5 cent piece to the begging letter, "to get people's attention". Fine with me; not only do I get a stamp for my niece's stamp collection, but I get a little cash for myself. And anything that makes chain letters more expensive to send out can only be a good thing.

I've had three of these in the last year; assuming I'm not on some sucker list somewhere (I certainly hope not!) that means the number of letters sent in that time would have been about three times the number of home addresses in the country. That's enormous! And the people who do this are apparently smart enough to read phone books, write out addresses, and use a photocopier!

What follows is a short rant about the mathematics of chain letters, which you can usefully skip if you already know they're stupid. I just have to get this off my chest.

Chain letters and other Ponzi schemes are illegal in many places (rightly so) and do nothing but cost society money (well, when I say society, I mean the stupid and the ignorant). What's odd is that the "It really works!" screeds in the letters themselves reveal just how much of a waste they are.

The one I got most recently makes some simple and apparently conservative assumptions about how many of your targets will forward the letter on (at each stage, 200 letters per person and 3% responses), and concludes that you will make about $77k per letter, for an expenditure of $211.

In the process, however, it reveals that each person who takes it seriously and sends $10 back up the chain (where you make your money) will spend $201 sending more requests down the chain. Although $10 of that is 5 cent pieces (see above), the rest ($191) is money spent sending pieces of paper around - effectively, invoices and receipts. So your $77k return carries a cost of about $1.5 million in postage and handling. That is without anything actually useful being done. When was the last time you bothered to buy something whose postage and handling costs were twenty times the price of the product?

But I think the reason people do it anyway is because they fail to look at it from anyone else's point of view. Looking at things from other people's point of view is one of the most important pieces of the human cognitive arsenal, and a crucial piece of our system of morals... but it is still far too infrequently used.

In this case, the figures suggest that 7,776 people will send you $10 each. But each of them is doing that in expectation of getting the same return you did. For that to happen, they will need 60 million people to sign on. That's more than the population of this country, and to attract those 60 million the number of letters sent out is 470 billion. You can see that the people you send this on to will need to send letters overseas and probably still won't get the returns, and the people they send it on to are going to need to figure out how to contact aliens.

Well, you think, the suckers down the line won't make it, but I will. But you're doing this because you got the chain letter yourself. You're already in that second tier, and the best you can hope for is that the number one person on your list originated this scam and you'll still make some sort of profit (but probably not the profit advertised). If they are down the chain a little, you're out of luck.

OK, so maybe I'll participate a couple more times - that expands the pool, and it can just keep circulating. That's where all that overhead comes in. You spend $210 every time you go in - to profit, there have to be 21 people who send you $10 each and don't get anything back. In fact, they'll spend $4410 in the process. So once again, you're hoping that you are high up the chain of suckers, and you have no way to tell where you are.

The bottom line is that this scheme produces nothing of value to anyone; it just moves money around. There are a lot more people paying out than getting back, so the odds are that you're one of the suckers. And if you're silly enough to fall for it, you probably deserve to.

No one will have read this far, because the people who know this already got bored a long time ago, and the people who don't know it probably didn't understand it and would anyway dismiss it all as negative-minded nay-saying without actually reading it and thinking about it. If you did read this far, and you learned something... then congratulations, and my work is done. Please pass it on to six people who need it, and don't send me anything.