Can someone here explain to me

[Tuesday Afternoon]

(like I am five y/o) why The Stock Market and Private Insurance are not Pyramid Schemes. Thanks.

[SummerSnow]

1. You're right .I don't see any difference, they're twins/ triplets.

[Proud Public Servant]

2. First, it sounds like we have to explain to you what a pyramid scheme is

A pyramid scheme involves people who join the scheme effectively rewarding the people who got in ahead of them. The scheme collapses when there is no one left to be brought in.

Private insurance could be likened to gambling, but not a pyramid scheme. The insurance company is betting that the number of people wishing to indemnify themselves against losses will exceed the cost of actual losses. Usually, as in most gambling, the house wins; sometimes (i.e., Hurricane Sandy), they lose.

I don't even have a good analogy for the stock market, but it's certainly not a pyramid scheme. The vanilla trading of stocks isn't even gambling, though other aspects of trading (e.g., short selling) surely are.

[Tuesday Afternoon]

3. From my understanding of the way policies are sold, Private Insurance sounds a lot like it pays

it's Agents via a type of pyramid scheme.

And insider trading also seems to work on the same premise, to me.

[COLGATE4]

4. Generally, Insurance agents are paid a certain

commission at the time they sell a policy, and then get another commission every time the policy renews. The more new policies, the more the agent makes in the year (s)he writes the policy and every year the policy is renewed. If the policy isn't renewed, no commission is paid. There's no 'pyramid' there.

Insider trading is carrying out a transaction in stock based on knowledge not available to the average investor. As such it is criminal. Again, there's no 'pyramid' here - just an illegal action which often lands the inside trader in jail.

[Tuesday Afternoon]

5. The agents bosses are also paid a percentage of everything sold

Under them , yes ? And I like the way you use the word -often- and aren't their sales/payments based on a percentage of what the agents under them sell or no?

[COLGATE4]

6. I don't know. But even if that's true, there's still nothing

about it that equates to a 'pyramid scheme'. I think you need to read up on what a Pyramid (or Ponzi) scheme actually is. In short, it's a scheme to lure investors by promising to pay them an unrealistically high rate of return on the money they lend you. The old (first) investors are actually paid the promised return (for a while) by using the money obtained from newer investors. Eventually the scheme's inventor can't bring in enough new money to keep paying off the 'investors' and the scheme collapses. Viz. Bernie Madoff.

[Tuesday Afternoon]

8. So then, Amway is not a pyramid scheme because

They sell a product ,,, ?

[COLGATE4]

10. No, Amway is a legitimate business. Unless you have

information to the contrary, in which case I would suggest you immediately contact the Michigan Attorney General's Office.

[Tuesday Afternoon]

11. I am so confused, according to this discussion Amway is a cult -

and/or a billion dollar pyramid scheme ...

http://www.democraticunderground.com/?com=view_post&forum=1002&pid=5950929

[COLGATE4]

12. The fact that some people don't like Amway

(and its founders, two of the biggest Republican financial supporters in Michigan) doesn't make the activity illegal. These guys developed the Amway "model" of business, a set=up which generously rewards those few at the top while screwing the majority of those lower down. That is however nothing different from the way most corporations work these days. Calling something is a cult is very much in the eye of the beholder.

[Tuesday Afternoon]

13. just because they work that way and are considered to be legal does not mean they are

moral and/or ethical. The way these types of business pay their employees is feudalistic. They are leeches on society.

[COLGATE4]

15. That's fine. Except your premise was that what they do constitutes

a pyramid scheme which by definition is illegal.

[Tuesday Afternoon]

17. I am not the only one with this premise.

[COLGATE4]

19. One or many, the premise is still wrong. nt

[Tuesday Afternoon]

20. agree to disagree. Have a happy holiday season, COLGATE4

[COLGATE4]

21. Agreed. The same to you and yours.

[applegrove]

7. I'm reading "Sapiens" by Yuval Noah Harari. About the origins of human culture. At some

Last edited Sun Dec 14, 2014, 03:01 PM - Edit history (1)

point humans stopped thinking about actual things all the time and started to be able to process fictions. These fictions allowed people to bond in much bigger numbers. Religion is a fiction. So is corporate cultrue. So is philosophy. So is much of what we believe in. Science is not. I thought it was in interesting point.

[Tuesday Afternoon]

9. I see what you are saying and I agree with

Where you are going ... Fiction ... Yep

[Tuesday Afternoon]

14. Intangibles are a racket.

[applegrove]

16. Not if everyone believes in them. They do order our lives. But I thought the point was very

interesting.

[Tuesday Afternoon]

18. Ideals are intangible be they good or bad and Yes, interesting. Thanks for bringing it here.

I hope that you are enjoying a Happy Holiday Season, applegrove

[applegrove]

22. Happy Holidays to you too, Tuesday.