Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi

Born March 3, 1882, died January 18, 1949, Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi was a was a businessman and con artist in the U.S. and Canada better known as Charles Ponzi.  His name is now a code word used to describe the questionable business schemes of Charles Ponzi.  Anyone who considers social networking and deals in public trust should be aware of practices that can direct even worthy endeavors toward becoming a ponzi scheme.

The primary nature of a ponzi scheme is collecting money from people while promising return that will come from money to be collected from other people, who will receive return from money to be collected from other people…. etc.   Two realities make this illegal unsustainable and fraudulent.   One reality is that the “other” people that money is to be collected from eventually run out and everyone still expecting a return has lost their investment with no way to recover it.   The second reality is that there is no real business of substance that is creating income for investors outside of new money from new investors.

Entering a legitimate profit/nonprofit partnership is not a ponzi scheme if there is a real business venture earning actual income.  Even if the profit from sales or services is layered and shared by many participants in the business, it is not considered a ponzi scheme.   Profits are always shared unequally among stakeholders in any business.  CEO’s, VP’s, managers and even customers (by way of rebates, discounts, referral rewards, etc) can share in company profits.  There is always a “pyramid” structure that pays out profits by some set of salary, employment or commission standard.  If the standards for rewarding stakeholders in a real business operation are transparent and each party agrees as part of their participation, it is a contractual arrangement that can benefit all.  Some will always receive more than others depending on the agreed upon structure at the time of employment, sale or investment.

But Charles Ponzi has brought to light more subtle forms of betrayal than the blatant illegal sealing of funds under false pretenses.  The success of his practices reveal the nature of social connections and human nature that made it possible for him to steal 20 million dollars from people by 1920 after arriving in the United States from Italy in 1903 with just $2.51 in his pocket.  Although he died in poverty after spending many years in prison, he taught us much about how to use people for personal gain.

Ponzi was an expert in getting people to act from a spirit of greed and the feeling of being treated “special”, better than others.  He used the power of claiming to have “secrets”, allowing certain people into the “in crowd”, promising something for nothing, and inspiring others to take great risks.  He was able to leverage good will, trust, fear, statistics and immediate rewards to gain a fortune.   Those used were often the most trusting or most desperate.   These same pressures can be used in even legal sales, services and investment opportunities.   They are no more noble in real business than they are in a ponzi scheme.

When working with nonprofit organizations, the opportunity and approval for abuse can be even greater since it is “for a good cause”.   Also, supporters of a good cause are often more trusting and abuse of funds may not be discovered as quickly because many donors/participants are involved and may not be seeking personal reward.  This makes the need for high standards and ethical principles even more critical when joining nonprofit and for profit endeavors.


Economic Circumcision

“So circumcise your heart, and stiffen your neck no longer.”  Deuteronomy 10:16

“Circumcision is circumcision of the heart, by the Spirit,                          not by the written code.       Romans 2:29

These biblical texts remind us of messy and painful surgery.  The cutting away of what covers the source of productivity, power and pleasure. Since it deals with the heart, this circumcision is not gender specific.   We also learn that the physical act is symbolic of a deeper truth.  Only when connected with understanding, meaning and commitment does the metaphor reveal the dedication and transformation intended.  Only then does it create a community of people with unique values and character. It is accomplished early in life by those who hold a dream that we will learn and live into the full meaning of it.

If the heart is the place circumcision is to take place, we will find it in the realm of our financial life since another biblical text says, “where your treasure is, there will your heart be also”.   As in the original practice of circumcision, this is a private place, one not often seen and not exposed to everyone.  Details of our financial standing are a personal matter and very few will ever know for sure your exact income or what you choose to do with it.

In our society, our economic prosperity is probably the indicator of power most people seek and regard in others.  Money is able to do great good, but also capable of abuse.  As other passions, the passion that fuels our desire for an unlimited more needs to be trained and restrained.   So the circumcision of heart is a way of cutting away those aspects of ambition and greed that would lead to unthinking harm or infidelity.  It  serves as a symbol and reminder of our primary commitments, relationships and convictions.

So what does economic circumcision look like? How does it happen?  In a new marketing effort that includes promise of great potential and personal gain, the heart can be “circumcised” in the very beginning of any new endeavor or dream.  The practice of giving away the first profit earned is a sacrificial generosity that sets the stage for a life of real economic freedom- not freedom to do as we please because we have money, but freedom to share with others or good causes from the start.

Any startup initiative that chooses to practice this circumcision of heart through sacrificial generosity will have the experience needed to follow a generous pathway in the future.  It also provides an example of generosity for others to follow and builds a community of those who have experienced the same sacrifice.

In order to be a meaningful expression of gratitude and faith, all donations are voluntary.  Even though circumcision was first given as a commandment of law and those being personally circumcised had no choice in the matter, the parents of any boy undergoing circumcision made a choice of faith and hope on his behalf.  It became a first step in identification with a community of people sharing the same faith and values. It was a rule of law that could be obeyed or not and when obeyed simply as way to keep the law, the act of obedience never fulfilled it’s desired end.

Consider the act of economic circumcision as a way to set your heart in the right direction at the beginning of an entrepreneurial journey that promises much good when practiced in the right way.  Dedicate your power, pleasure and productivity be used for great work.  The personal reward of a focused attitude will be greater for you personally as well as those around you.  It may be a simple procedure to sacrifice your initial profit, but it’s likely to be painful, even when you direct your gift toward a cause you love.  Once chosen, you be part of community set apart for change.