Episode 4: Ponzi Scheme

*This is a short episode (I'm leaving for Greece in 20 minutes!), but I will continue to talk about this next week!

Do you know this guy, Bernard Madoff? He's in jail for being the operator of one of the largest Ponzi Schemes in history.

What is a Ponzi Scheme, you ask? It's basically making money from nothing.

Imagine you are a point on this graph, and each line is a money transaction from person to person.


If you end up with more money than you started with, then the Ponzi Scheme is successful. However, on a finite graph, it is impossible.

In an infinite world, Madoff wouldn't be in jail. He'd be a smart, rich, free man.

How, you ask? Let's look at an infinite binary tree:




If each person had to pay 1 million dollars to the guy below him, then think about what would happen...You would pay 1$ million and receive 2$ million. You would make a million bucks.

Sounds nice, right?

But will the Ponzi Scheme always work in an infinite world?

What about if the graph is an infinite lattice?

Think about it...


I'll have to tell you more next episode :)