How to lose money in this economy
The cold hard truth about MMM
A brief introduction
It goes without saying that things are hard in Nigeria right now with the recession and everything. And the fact that the value of the Naira is falling like this random person in this GIF isn’t making things better. As a country that imports everything, this means that prices are going up, while your earning power remains the same (or in some cases, is going down), which means you get less per Naira.
Making poor decisions
This situation is making people desperate and it is no secret that desperate people do desperate things. People are desperately looking for money in this economy and it seems like they would do anything to get their hands on it, no matter how risky it may be. You might think that in times like this, caution would be the watch word with regards to investments, because logic demands that what precious little you have should be protected from being lost right? Wrong. Which is why I am severely confused that a lot of people are pumping their hard earned cash into this MMM thing.
Yes, this is an anti-MMM article.
The economics of recession
Before we can tackle this MMM thing though we need to look back in time to uncover a pattern. Truth is that we see this cycle of behavior during times of economic hardship: Things get tight, money not moving as freely, people get desperate, people make careless stupid money decisions, people lose money, some people have strokes, the economy gets better, the other people get over it somehow but when there is another economic downturn, we see the vicious cycle repeat itself. It happened in the great economic nonsense of 07/08 and it is happening again now.
“We learn from history that we learn nothing from history.”
George Bernard Shaw
Money making machine
MMM is this “new” investment opportunity that has taken Nigeria by storm. MMM got its name from the initials of the surnames of the founders of this innovative Russian company; Nigerians, known for their creativity, turned the acronym to mean Money making machine, which, if you are being honest, is a better representation of what they claim to do. The organization touts itself as a network of people helping each other which is very kumbaya of them. That their definition sounds warm and cozy and not malevolent at all, which is why they would call it that rather than what it really is: A PONZI SCHEME.
The terrible horrible no good very bad Ponzi scheme
Ponzi schemes have been around for a very long time. A quick search through Wikipedia reveals the simple definition of Ponzi scheme as “a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources”. This definition already highlights the major problem with Ponzi schemes: no value is being created and captured and hence the investment model is unsustainable.
Robbing Peter to pay Paul
From the above definition then we can see that this is the classic case of robbing Peter to pay Paul. In MMM, Whatever money is brought in by new investors is used to pay the old investors a “profit”. The onus now lies on everyone in the pyramid to ensure that people keep joining and fresh money keeps flowing in. And so far it has been.
In Nigeria right now there are A LOT of these schemes bouncing around. You only need to check the WhatsApp broadcasts sent out to millions of users every day or Facebook streams to see messages inviting you to join these marvelous groups of people helping each other. In this article I may reference only MMM but they are all the same. In fact some are even worse. MMM promises 30% return for your “help”, a mouth-watering prospect, but there are others that are offering as high as 70% and 100%. If it sounds too good to be true, it’s because it is.
The unsaid effects of MMM on the economy
At this junction I just want to highlight one other major disadvantage of schemes like MMM that a lot of people may not have considered. The opportunity cost of creating ACTUAL value. Every Naira that is invested in MMM, a product that does not create value of any kind, is Naira that could have been placed in a value creating investment which in the long run would be better for our economy. So even though MMM might seem to be a short term solution to a select few, it is a long term problem for all of us.
The beginning of the end is near
MMM will crash when the amount of money being paid out to its old investors is much more than the money being injected into the scheme by new investors. When that point is reached the scheme will begin to default on payments of returns which will cause less people to join which will cause there to be less money and more defaults. It becomes a catch-22 of losing money. MMM can also crash when there are heavy withdrawal demands (Did someone say Christmas?) that cannot be met by the supply of fresh Naira by new investors (probably because these people are keeping their money for Christmas enjoymentation). And here is where the problem begins to get apparent. When this point is reached, people will lose not just their promised returns but their principal as well. And seeing as this particular iteration of the scheme has been running for quite some time, I can assume that people have built some level of trust in the system which makes them put more and more money in so there is a whole lot of principal to lose.
An appeal
Stop now you MMM patron, or potential MMM patron, and ask yourself: Is this 30% return on my “investment” a worthy reward for my peace of mind knowing that putting money inside MMM is playing a game of Russian roulette with only two shots left?
That’s a long question, I know, but a necessary one.
Final words
There are a lot of people who have made money from MMM. You might have heard their stories; some of these stories are even told as testimonies. Listening to them you can almost taste the money. These warriors have braved the rough winds of uncertainty to venture into this most ludicrous and most risky of ventures and emerged victorious and unscathed, principal and shiny interest in hand. It is this glint from the spoils of their success that urges people on into the darkness for a share of theirs.
To these warriors I say this, I do not pray for you to fail but like the elders say the child that was warned about the pepper in the vegetable soup should not cry when there is fire in his mouth.
I legit just formed that proverb but you get what I mean.
P.S. If you enjoyed this article then please recommend it so others can see it plus you can also share it on Facebook and Twitter.
One last thing, Follow Primate Culture on Medium and Twitter for more articles and bants. Ish.
