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Get-rich-quick schemes promise high rates of return for a small investment. Most such schemes promise this high rate of return whilst at the same time promising that they are legal and risk-free.
Economic theory states that risk-free opportunities for profit are not stable, because they will quickly be exploited by arbitrageurs. Nevertheless, many people long for wealth, and find these schemes highly desirable.
Get-rich-quick schemes can be broken down into a number of categories:
It is clearly easy to (potentially) get rich quickly if one is prepared to accept very high levels of risk -- this is the premise of the gambling industry. However, gambling offers the near-certainty of completely losing your original stake over the long term, even if it offers regular wins along the way.
Multi-level marketing is potentially highly profitable for those who first start the scheme. However, it is mathematically implausible that all the participants in a multi-level marketing scheme will all become rich from selling to one another. Usually, the lowest tiers of the scheme end up losing money.
Illegal get-rich-quick schemes
When there is no pretence at selling a product, multi-level marketing degenerates into a pyramid scheme or matrix scheme, which is illegal in most countries.
Ponzi schemes are illegal in most countries.
Insider trading is illegal in most countries.
In general, if it seems too good to be true, there is usually a catch. Many apparent get-rich-quick schemes are the work of confidence tricksters.
See also
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