Email chain letter: Scam or not?

This week, a friend of mine sent me one of those chain letters, we've all recieved once or more. Sometimes from friends, but more often from people we've never heard of: Chain letters that tell you to send a specific amount of money to the first person on the list, add your name to the bottom, removing the first person and then sending on the email to as many people as humanly possible.

We also all know that, if you do the math, it can be easily shown that a pyramid system like this can never work. But did anyone ever really do the math?

These letters always suggest to forward the chain letter to hundreds of people but at that rate, you soon reach an interstellar population. But most people throw the letters away, so only a small fraction of the people that actually recieve a letter will send it on.

Below, you can play around with the numbers. What percentage of people actually forward the letter? How many people to they send the letter to and how long is the list of names to which your name should be added?


Even if the numbers are moderate, it's nearly impossible to make a buck.
The letter I recieved had a list of names, six positions long. It suggested I sent the list on to 200 people and gave an example that if only 2 percent would forward the letter, I still would be making a bundle (in fact, at 10 euro per person, I would be making 40.960 euro (see note2)).
However, what the letter did not mention, was that by the time I should get paid, the people that should pay me already have to forward the chain letter to more people than are currently on the internet.
And of course, this is assuming that the person who's number one on *my* list, initiated the chain letter. If he didn't, everyone's already fucked anyway.

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I did a quick internet search and found several copies of my letter. Same letter, different list of people, in fact, none of the names matched in the five letters that I reviewed.
This means that the person who was on top of my list, at best , was sixth behind the person who started the list. At the numbers the example uses in the letter, it also meant that me having received that exact email only once was a near impossibility. By the time I should be getting my money, everyone in the world should already have received that very same letter over and over and over and over and… again.

This shows that the numbers used in the example are, well, slightly over the top. The numbers should be much more conservative. Maybe anyone who does forward the mail doesn't forward it to 200 people, but only to 50. And maybe not 2 percent actually reacts, but maybe only half a percent.
What's funny is, that if you actually do the calculations with these numbers, the chain letter soon dies out or grows very, very slowly.

However, it also shows that joining in one of these 'scams' actually can pay off. Get your numbers just right and you'll see that for every euro invested, you might get a couple back. Not much, but maybe just enough to make it worth the gamble of investing the 10 euros my letter asked for.

Update (February 2011): I took out an online calculator which showed the absurdity of chain letters.