Ponzi Schemes - Also Not News

I will hand it to CNN.com that they're at least posting articles that are tangentially relevant to recent news stories. Today is the sordid tale documenting the rise and fall of the great grandfather of the pyramid scheme, Charles Ponzi.

Who was Ponzi -- what the heck was his scheme? - CNN.com: "In fact, the morning that the Post ran Barron's report, investors lined up around the block outside of his office in an attempt to give him more money -- even after they'd been told that they'd been scammed. Ponzi later boasted that he'd taken in a million dollars in new investments the day the report ran."

This is quintessential compliance psychology at work, and is also the reason that doomsday cult members tend to grow more faithful after the date their leader has chosen for the world to end comes and goes. They believe in their guru so completely that they quit their jobs, sells their homes, and congregate in a cave somewhere to await the end of days. When it invariably turns out that everything's still humming along, they tend to reinforce their belief in the only thing they have left: the cult.

If Ponzi takes your money and tells you he's tripling it, and then someone else tells you you're broke, which of the two men is making you feel better about your choices? Which are you more likely to want to believe?