An Offer That You Can Not Refuse
Charles Ponzi was an Italian con artist who lived in USA and Canada in 1920s. He started his career as a postal worker, but as soon as he was accepted to attend the University of Rome, he left his job and attended the University of Rome. At the University of Rome, he surrounded himself with rich friends who considered the university to be a vacation. The peer pressure got to him, and he was inclined to live their lifestyles, and spend his money on alcohol and other leisure activities instead of paying his tuition, four years later, he had no money and no degree. He started to think about a way to make money.
With no degree and no money, his family asked him to migrate to the USA to establish himself. His first stop was Boston where he learned English and worked as a dishwasher. In 1907, he moved to Canada, where he worked at Banco Zarossi. Banco Zarossi was founded by an Italian immigrant to serve the Italian community in Canada. At the bank, it was clear that Charles Ponzi had a charming personality and high IQ, and he worked hard and became the manager of the bank. Later, the bank was involved in some illegal activity, and the founder fled to Mexico leaving Charles Ponzi with no job.
This incident ignited his imagination, and he forged his first check, he got caught soon after it. In jail, he sent a letter to his mother and told her that he is working as a prison guard, and he learned to keep lying to cover his original lie. As soon as he was released in 1911, he started to smuggle Italian immigrants across the border, he got caught again, and he was jailed in Atlanta. After his release he worked multiple jobs until he met Rose Maria Gnecco, she was a second-generation Italian immigrant, but he was able to charm her and marry her despite his past.
Double your Money in 90 days was born
After marrying Rose Maria Gnecco, he decided to start working for himself, and he started selling postal coupons. The idea was, if you sent a letter from Europe to the USA, you would include a coupon in your later, so the receiver can buy a stamp to send you a reply. Ponzi decided to convert the coupon into a 5-cent stamp and convert the stamp into cash. He started to raise money from the public to buy coupons in Europe and sell them in the USA. To entice customers, he started to promise investors that he would double their money in 90 days.
He made customers an offer that they could not refuse, and he was able to attract thousands of people who willingly gave him their money. People were mortgaging their homes, and life-saving to invest money with him. He would encourage them to invest their profits and make more money. He targeted new immigrants, police departments, and city officials because it made his scheme sound legit.
At his peak, he was receiving $250,000 a day and he was spending it on buying expensive mansions, and expensive cars. To keep up with his expensive lifestyle, he had to expand his operation, and he started to collect money from new investors to pay older investors, essentially, he was “robbing Peter to pay Paul”.
When the media started to ask Ponzi to prove that his operation was legit, he sued them. They investigated his operation and started to uncover his scheme. The postal office released information about the postal coupons and his scheme started to collapse, and people camped outside his office and started to ask for their money. He had to pay $2 million in three days to angry investors outside his office, and he knew he could not pay anymore, so he bought donuts and coffee and sat with the crowd to alter their mind, but his charm did not work.
It was later determined that Ponzi was operating in the red for a few years, and he never had the money. He was convicted of mail fraud and served time in federal and state prison. After his released, he started another Ponzi scheme in Florida. He was jailed again, deported to Italy, and moved to Brazil on a later date where he had a heart attack in 1941, and passed away with only $75 to his name.
Now, we all know what the media mean by the Ponzi scheme, and the founder of the term Double your money in 90 days.
What can companies learn from Charles Ponzi?
Do not let greed drives your business.
Charles Ponzi had a very legit idea, converting foreign postal coupons into cash, but he got greedy and he wanted to get rich overnight and that usually leads to disasters. Greed forces you to focus on making more money and not on strategies that could improve your business.
Greed will also force you to overlook immoral behavior as long as the employee is making money for the company.
A big ego can lead to big disasters
He was driven by his ego, when he promised people to double their money in 90 days, and failed, he had to start robbing money from Peter to pay Paul. He did not want to be wrong, so he started to use the money that he received from new customers to pay the previous ones.
Ego makes you make big decisions without consulting with anyone, ego manic leaders tend to think that their decisions are always right. Egocentric leaders truly believe that they are the smartest people in the room, and they refuse to listen to anybody else, this kind of thinking leads to disaster.
Charisma is not a business strategy
Ponzi was a charismatic force of nature, he was able to charm people to invest their money with him, however, charisma alone is not enough to run a healthy company. If charismatic leaders lack a moral compass, they become narcissistic and dangerous, and history is full of people who had charisma and lacked moral values.
Some charismatic leaders can cast their vision, but they lack the discipline to execute it, and if they lack the moral compass, they will follow this creed “the end justifies the means”. To execute your vision, you need a concrete action step that you can follow.