If It Sounds Too Good to Be True…

If It Sounds Too Good to Be True…

My mother always had a saying that you may have heard, “if it sounds too good to be true it probably is.”  This has been some of the most cogent advice I’ve ever received.  Indeed in many situations we are presented with a deal of a lifetime, something we just cannot pass up with amazing low risk, high reward possibility.  The problem is, unless you were the first investor in microsoft, this is probably a farce at best, and most likely fraud.

This too-good-to-be-true model is the one that most ponzi scheme perpetrators rely on.  They target people who usually already have wealth, or at least funds they’re willing to invest and cajole them into thinking that their higher than usual return on investment model is a once in a lifetime kind of deal.  The initial investors are usually pleased with the returns, they indeed receive the return they were promised, and sometimes more, because they can reinvest now that the confidence is built.  But as the investments come pouring in from people the ability to pay all of them back with interest becomes extremely burdensome and eventually fails, leaving almost nothing for those who were defrauded.

Ponzi schemes are a type of fraud where someone will promise a certain higher than usual return on investment to investors and utilize the funds from new investors to pay off old ones, the problem is sustainability.  Ponzi schemes are an extreme example of the “if it sounds too good to be true,” idea, but it’s not the only one.  There are many ways in which someone can be duped by a fraudster with outlandish, or sometimes just slightly hyperbolic verbiage.  If you’re buying a car with 150,000 miles on it and the owner says its never had an major issues there’s a possibility they’re telling the truth, but if the price is significantly below the average price for a car with no major issues and similar miles then maybe it’s time to either do a little more homework or move on entirely.

This idea of a deal being too good to be true can infiltrate nearly every aspects of business as well, such as a buyer for a large manufacturing plant who begins working with a new distributor who has ridiculously low prices compared to the competition, as well they offer gifts for large purchases.  Once the buyer has made a large purchase, one that looks extremely beneficial for the company, the distributor raises their prices beyond that of the competition, and if the buyer stops purchasing from them they’d be happy to let management know about the gifts the buyer took while using company funds to purchase the product.

Remember, it is easy to get caught up in something that might either put you at risk for fraud, or make you a fraudster yourself, either of which can be (mostly) avoided if you remember the old saying “if it sounds too good to be true it probably is.”

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