You'll learn:
The program you've been invited to join is almost undoubtedly a pyramid scheme if one or both of the following statements are true:
Pyramid schemes are illegal — and for good reason.
Although the few people at the top of the pyramid may receive some benefit from participating, it is always at the expense of the people further down.
In other words, if you are asked to join a gift exchange, you are being recruited to be a victim.
And if you participate in a gift exchange and recruit others, you are recruiting further victims of the scam.
Fortunately, there are many, many alternatives to gift exchange and book exchange programs that do not involve pyramid schemes.
The best way to keep yourself and others from being scammed is to look at the shape that is formed by gifts given and gifts received.
A pyramid scheme is triangle-shaped. People at the top of the triangle receive gifts from the people below them. People below them receive nothing, unless they perpetuate the scam. Eventually, there aren't enough people in the world to form a bottom layer. Triangle-shaped programs always have victims.
A white elephant exchange, also known as a round robin, Yankee swap, or dirty Santa, is circle-shaped.
Each participant gives one gift and receives one gift. No one is left high and dry. These are legal, fun, easy to organize, and have no victims — except victims of bad taste in gifts.
A Secret Santa exchange is also circle-shaped. But instead of one large circle of participants, there are multiple small circles consisting of pairs of participants who are assigned to buy gifts for each other. These types of exchanges do carry the risk that one member of an assigned pair will receive a gift but not reciprocate. However, because these exchanges are circle-shaped, they do not involve perpetuating the scam on other victims. The Reddit Gift Exchange is a popular version of this.
A "pay it forward" initiative is line-shaped (but can also be circle-shaped). Each participant pays for the next participant's item. Typically, "pay it forward" programs are spontaneous and entirely voluntary, as when a person in line for coffee offers to pay for the next person's coffee as well. That person then has the option to "pay it forward," by covering the coffee of the next person in line, but they are under no obligation to do so. Because there is no expectation of recipricocity, "pay it forward" gifts are not scams.
Charity drives and donation programs, such as food drives or toy drives, are sun-shaped. A person is free to give one or more items to the program, to be distributed to those in need. There is no expectation that the donor will receive any material goods in return. While some purported charities can be scams, and participants should perform due diligence to determine whether the charity is legitimate, there is nothing inherently scammy about a charity drive.
The American Library Association provides a list of charities that accept book donations. Toys for Tots and other similar charities accept toy donations. And — bonus — your donations are generally tax-deductible. Not so for gift exchange scams.
Many gift-exchange programs are effective at perpetuating themselves because they propose a seemingly heart-warming worst-case scenario:
But if you would like to make a stranger's day or give books to children in need, the many legal alternatives described above are much better ways to do that, because:
Even if you acknowledge that the odds are stacked against you, and that pyramid schemes can get you into legal trouble, you may think:
Gift exchanges are like gambling in the same way that Three-card Monte is like gambling. Yes, they involve an entry fee and a level of risk. But both are con games.
Legal gambling, such as big-jackpot lotteries and instant-win scratch-offs, are heavily regulated. The odds of winning must be disclosed, and gaming organizations must adhere to numerous rules and regulations. No legal gambling method involves recruiting further victims as the primary method of gain.
The best way to protect yourself and your friends from falling victim to these gift exchange scams is to:
If a friend begins recruiting victims on social media, should you call them out on it?
That depends on a number of factors, including the strength of your friendship and their general receptiveness to criticism.
Keep in mind that friends who have already participated in the scam might continue to defend it, rather than admit to themselves that they've been duped.
With diplomacy and tact, however, you can help people make informed decisions and avoid being scammed or scamming others.
Snopes.com Fact Check: Secret Sisters Gift Exchange
The 36 books for 1 "book exchange" pyramid scheme debunked
Better Business Bureau: Scam Alert -- Facebook Gift Exchange is Really a Pyramid Scheme
Created by Shaun Gallagher. Check out his books here:
Pyramid icon made by Good Ware from www.flaticon.com is licensed by CC 3.0 BY.
Gift icon made by Vectors Market from www.flaticon.com is licensed by CC 3.0 BY