“I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me.” - Charles Ponzi
Charles Ponzi was born in Parma, Italy in 1882. During his early years of childhood, the Ponzi household experienced financial turmoil that would turn the family’s lifestyle from lavish to meager in a few short months. The family’s fall from grace not only shaped the life of the household’s only child, but it altered the course for thousands of victims throughout many decades.
The former well-to-do Ponzi family felt that Charles was their ticket back to extravagancy and they treated him as such. Encouraged to run with a rich crowd of friends, Charles always felt the need to keep up. At first, the desire to be rich like his friends benefited him academically as he worked hard in school and was later accepted into the University of Rome La Sapienza. In 1900, this was an especially impressive feat since only about 5% of 18-21-year-old males attended college. Charles’ future looked bright until he continued attempting to live the lifestyle that his money spending peers were accustomed to, like frequenting bars, cafes and opera shows, despite the fact that he couldn’t afford it. Due to his excessive spending and lack of funding, Charles found himself broke and without a college degree just a few years later.
The Ponzi family didn’t give up hope on Charles’ ability to find success. With the goal of returning the Ponzi name to its former glory, they encouraged him to travel to the land of opportunity, The United States of America.
In 1903, Charles arrived in Boston empty handed, after gambling away what little money he had left on the ship he travelled over in. In the opening quote of this article, which was originally given to The New York Times, Charles referenced the $2.50 he had when he arrived as well as his goal of making $1 million dollars (equivalent to over $31 million today). Charles had a burning desire to prosper and was willing to sacrifice anything and anyone along the way.
Upon his arrival, Charles started working odd jobs as a dishwasher and waiter, but was later fired due to short-changing customers and stealing from the restaurant. He then worked as a teller at Bank Zarossi, a bank that catered to new Italian immigrants. When the organization filed for bankruptcy due to bad loans, Ponzi was left destitute once again. The even more desperate Charles later decided to forge checks to pay his expenses, which landed him in prison for three years. Once released from jail, he quickly got involved in smuggling Italian immigrants across the border, which put him behind bars in Atlanta for another two years. It was clear that Ponzi was on a path of no return, but it wasn’t until he traveled back to Boston that anyone understood the magnitude of his con-artistry.
While in Boston, Charles received a letter in the mail from someone in Spain that contained an “international reply coupon” or IRC. An IRC allowed someone in one country to send a letter to someone in another country and include the cost of postage for a reply. After receiving his letter from a foreign country, Charles’s realized that due to the lack of regulation and varying costs of stamps between countries, he could turn a profit by purchasing lower cost IRCs in one country and exchanging them for higher cost stamps in another. To scale his scheme, Ponzi hired numerous foreign representatives that would purchase the IRCs in their own country before sending them back to Boston, where they would be exchanged for higher valued stamps and sold.
Although his IRC exchange racket started turning consistent profits, sometimes making 400% returns on sales, Charles wanted more - and to get it, he needed investors to take advantage of. The fast-talking Italian promised many returns in excess of 50% in a few months. The wildest part was that he actually honored this claim for a while… Until he couldn’t any longer.
Ponzi was able to pay previous investors their 50%+ returns by using the money deposited from the most recent investors. To keep the scheme afloat, new investors always needed brought on, which was Ponzi’s primary focus. His manipulative efforts paid off financially as Charles Ponzi bought a mansion in Lexington, Massachusetts and was reportedly making $250,000 per day, finally restoring the Ponzi name to “greatness.”
Seemingly too good to be true, The Boston Post began to investigate the organization, which caused investors to panic and attempt to get their money back quickly. When they couldn’t, because some of their funds didn’t exist, the gig was up.
According to Biography.com, Charles Ponzi was arrested on August 12th, 1920. After pleading guilty to mail fraud and owing and estimated $7 million, he was sentenced to jail once again. His wife Rose officially divorced him soon after his 14 years spent in prison. Years later, the Italian con-artist died in Rio de Janeiro… penniless.
Charles Ponzi was the epitome of greed.
Charles’ scam, later known as the Ponzi Scheme, became a well-known, highly immoral, manipulative and illegal practice that thousands of greedy business men and women have implemented to defraud investors for over 100 years now.
Bernie Madoff, also known as “The Wizard of Lies,” is one of the more recent and probably most well-known examples of using the infamous Ponzi scheme to defraud investors. Madoff holds the record for the largest scheme, stealing an estimated $17.5 billion.
Madoff’s motivation was the same as Ponzi’s - Greed.
Point 1. Greed in the absence or presence of wealth is bad.
Point 2. Wealth in the absence of greed is good.
These two points are typically misunderstood, because greed and wealth are often idolized together.
Jordan Belfort, aka “The Wolf of Wall Street” is a talented salesman turned greedy fraudster that eventually plead guilty to stock-market manipulation that cost investors over $200 million.
The big screen adaptation of the memoir Belfort wrote in prison, The Wolf of Wall Street, left viewers gawking over his lavish homes, fancy yacht and all-around Hollywood lifestyle. By throwing around his money (sometimes literally) like he did, the cost of his wealth was often down played. Belfort’s greed ruined his personal relationships, negatively impacted the lives of over 1,000 investors and if you Google “Jordan Belfort’s Net Worth,” you should find articles stating it currently stands at “-$100 million.” That’s right - he is indebted millions in reparative damage due to his securities scheme. The cost of his greed ended up being the most important thing in his life- his wealth.
Ponzi, Madoff & Belfort all had an uncontrollable desire for “more,” and in their minds, for them to win meant someone else had to lose.
Greed is a zero-sum game - wealth is not.
Working hard, doing good & investing responsibly will make you wealthy.
Wealth will test you, however. Once newfound wealth is experienced, greedy thoughts may enter your mind, as you may become unsatisfied with your new level of wealth and want “more.” When “more” is attained, you’ll be left wanting even “more.” With greed on your mind, you will never have enough.
To keep greed at bay, it’s important to create targets, but avoid moving the target further every time the previous target is reached. Instead of fighting for “more,” which feeds greed, identify what is “enough,” which feeds gratitude.
Gratitude is greed’s strongest adversary. By focusing on what you have and not what you don’t, the uncontrollable desire for “more” is eliminated, leaving you with wealth in the absence of greed.
Greed Enough is good.