As the name suggests, a pyramid scheme is rarely a sound investment. In spite of this, every few years there’s an article in the news about people who have been duped by such a scheme. So what exactly is a pyramid scheme, and do people actually make money from them?
In this lesson, students learn about how pyramid schemes work, and use geometric sequences to model the (exponential!) growth of a pyramid scheme over time. While these investments may look appealing, a more detailed analysis will reveal why most people who put money into a pyramid scheme never recoup their investment. Pyramids may be fun for archaeologists or geometers, but when it comes to your finances, they’re a shape that’s best avoided.