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My accidental pyramid scheme

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Don’t let anyone ever tell you that video games aren’t educational. It was a video game that introduced me to the concept of pyramid schemes, and in a way that’s stuck with me for life.

You see, I accidentally created one.

I, 13 at the time, was an avid player of the online RPG Runescape. One of the things I loved about the game was that it offered an unchecked open market economy that, while full of weird quirks due to the game’s systems, managed to simulate a reasonably intricate chain of supply and demand based wholly on player interactions. Players mined the iron, made it into ingots, fashioned them into armour and weapons, and could sell the products at any point along that chain. Some items held immense value due to rarity, as only specific monsters or uncommon events allowed you to obtain them at random. And a big part of the price tag was based on the value that the game’s virtual society assigned to any given item.

But I stumbled on one kind of item that existed in a strange little economic bubble. It wasn’t difficult or expensive to obtain, but other players would pay massive markups for it based on its perceived rarity. That item was the fez. You know those little cylindrical red hats with a tassel? That’s where I made my fortune.

To get a fez in Runescape, you had to complete an obscure quest in the game’s desert region. One reward for the quest was access to an in-game store, which sold a variety of “desert clothing” for around 30 gold coins a piece — a trivial amount.

I’d always loved trading, so I bought a few sets of the clothes to include on offer when selling my goods. They proved popular, often fetching two or three thousand coins a piece. But the fezes were easily the hottest seller: I was able to consistently get 10,000 gold for those cheap little hats. Sometimes even more than 15,000.

Seeing an opportunity, I bought hundreds of the items, and spent a lot of time making trades. I showed potential buyers one of each item, so that they didn’t realize I was buying them in bulk, and quickly made hundreds of thousands of gold coins in profit.

I let a friend in on the secret, and he found similar results. But our greed wasn’t satiated by simply making these trades ourselves. We soon hatched a bigger plan.

Making sales took a lot of time. But what if we could have people to do the selling for us? We began to talk to our in-game friends, and to make some new ones. We made them an offer that was mutually beneficial: we sold them a large inventory of our desert clothing, 25 of each item, for 150,000 gold. And of course, once they ran out, we’d be happy to supply them with more product. And when they inevitably ran out of fezzes, we restocked them — with another full set of everything, at full price.

If I’d even heard of a pyramid scheme, I had no idea how one worked. The irony of selling clothes purchased from near Runescape’s actual, literal pyramids was lost on me as I employed half a dozen salespeople to travel the world selling our goods at a markup, unaware of this massive markup they were paying us. The investment of gold was so low, and the return on our time spent increased hugely. We even had one or two of our salespeople start recruiting subordinates of their own, adding a third layer to the pyramid. Those middle-managers got to buy even more inventory at once — at appropriately increased prices, of course.

For a few glorious months, we were rich. My partner and I each made several million gold coins off of our sales. He spent it, turning his in-game house into a massive, intricate palace with all the bells and whistles, while I hoarded mine, buying myself a few vanity items, but otherwise letting the massive pile of wealth grow ever larger.

Then one day, without warning, our seemingly unlimited pit of money sealed shut. Runescape’s creators, Jagex, implemented a system that allowed players to buy items remotely by just typing in their name, and showed an average price. The price of a fez dropped from five digits to two overnight. Suddenly my partner and I were left with hundreds of now-worthless items in our storage, with nothing but fond memories (and a pile of gold) to remind us of that free, unregulated market.

That experience at such a young age gave me an awareness of pyramid schemes, and an eye for spotting them. Whenever I see people in Facebook groups sharing their multilevel marketing get-rich-quick products, I have flashbacks to what it was like to be on the top of that pyramid, raking in immense wealth while pawns ran around doing the difficult work. It was so easy to do. And that’s why market regulations and watchdogs are so essential in the real world — if a couple of kids can throw together a scheme to make absurd profits, I have no doubt there are charismatic, highly educated businesspeople out there capable of swindling every single one of us out of our hard-earned money.

When I finally quit Runescape a few years later, I still had a considerable amount of gold in the bank, and decided to make up for my past misdeeds. I bought some of the game’s most stylish, pointless, and expensive items, and filled my backpack with them. I spent a day wandering the land, handing them out to people at random, and then teleporting away without explanation.

I like to think that maybe one of the people who received a top hat worth a quarter of a million gold from me had once paid one of my underlings 10,000 gold for a worthless fez.

Image: Jeff Mijo-Burch/The Cascade

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